A corporate treasurer could set a cap and a floor

Assignment Help Finance Basics
Reference no: EM13517338

1.An expected receipt of British pounds in ninety days can be fully hedged:

(a)with a ninety-day forward contract to buy pounds.

(b)with a ninety-day forward contract to sell pounds.

(c)with a thirty-day contract to buy pounds.

(d)with a thirty-day contract to sell pounds.

2.If a company uses a forward contract to fully hedge a required payment of yen in ninety days:

(a)changes in the dollar price of yen will have no effect on the net (hedged) dollar value of the yen payment.

(b)the net dollar value of the payment will fall if the yen depreciates.

(c)the net dollar value of the payment will rise if the yen depreciates.

(d)the net dollar value of the payment will change by less than the change in the dollar price of yen.

3.A risk management product which is similar to a cylinder is:

(a)a free range call.

(b)a range-forward contract.

(c)a written swap.

(d)a range-backward contract.

4.A corporate treasurer could set a cap and a floor on the interest rate for a future loan by:

(a)buying an interest-rate put option and then writing an interest-rate call option.

(b)writing an interest-rate put option and then buying an interest-rate call option.

(c)buying an interest-rate call option and then writing an interest-rate put option.

(d)writing an interest-rate call option and then buying an interest-rate call option.

5.A bank could set a cap and a floor on its funding cost (cost of bank deposits) by:

(a)buying an interest-rate put option and then writing an interest-rate call option.

(b)writing an interest-rate put option and then buying an interest-rate call option.

(c)buying an interest-rate call option and then writing an interest-rate put option.

(d)writing an interest-rate call option and then buying an interest-rate call option.

6.A bank could set a cap and a floor on the interest rate it receives from a commercial loan by:

(a)buying an interest-rate put option and then writing an interest-rate call option.

(b)writing an interest-rate put option and then buying an interest-rate call option.

(c)buying an interest-rate call option and then writing an interest-rate put option.

(d)writing an interest-rate call option and then buying an interest-rate call option.

7.A corporate treasurer could convert a floating-rate loan to a synthetic fixed-rate loan by:

(a)buying interest rate futures.

(b)selling interest rate futures.

(c)writing interest-rate call options.

(d)writing interest-rate put options.

8.If interest rates are expected to rise:

(a)the December 1994 three-month Eurodollar futures contract will see for more than the June 1994 three-month Eurodollar futures contract.

(b)the December 1994 three-month Eurodollar futures contract will sell for less than the June 1994 three-month Eurodollar futures contract.

(c)the December 1994 three-month Eurodollar futures contract will sell for the same price as the June 1994 three-month Eurodollar futures contract.

(d)the yield on the December 1994 futures contract will be less than the yield on the June 1994 futures contract.

9.A synthetic loan constructed with interest-rate options:

(a)will be less expensive than one constructed with FRAs.

(b)will be less expensive than one constructed with interest-rate futures contracts.

(c)will be more expensive than one constructed with interest-rate futures contracts.

(d)will be the same price as one constructed with interest-rate futures contracts.

10.The cost of setting an interest rate cap on borrowing costs can be:

(a)reduced by writing interest-rate put options.

(b)reduced by writing interest-rate call options.

(c)reduced by buying interest-rate call options.

(d)reduced by buying foreign-currency options.

Reference no: EM13517338

Questions Cloud

Resurgence of islamic fundamentalism : There has been a resurgence of Islamic Fundamentalism (or revivalism) in Afghanistan, Iran and other parts of the Muslim world. Explain what you feel is the cause of this resurgence and whether you believe liberal democracy requires secularization of..
Explain why a country''s national interest : Describe what America’s vital interests are today. Explain why a country's national interest is so hard to define.
Describe the prevailing arguments : Describe the prevailing arguments of what constitutes a "just war," and assess the justice of the Vietnam War in that context. Speculate on how the world would be different today if the U.S. had not become involved in Vietnam.
A foreign-currency net investment hedge : Would be accounted for under FASB no. 52, and such hedges are not recommended by financial experts unless they are designed to hedge actual cash flows.
A corporate treasurer could set a cap and a floor : A corporate treasurer could set a cap and a floor on the interest rate for a future loan by:buying an interest-rate put option and then writing an interest-rate call option.
Swapping fixed interest rate payments for floating : Issues fixed-rate debt and is obligated to make fixed-rate payments to its bondholders regardless of whether it receives floating-rate payments from the other counterparty.
To set a cap on the interest rate that a company : The interest-rate cap that a corporate treasurer can set on a future loan is equal to the rate implied by the strike price of an interest-rate:
An option to sell an asset is called : The right, but not the obligation, to buy or sell an asset at a contractual price on or before a specified date.
Foreign-currency contracts are likely to be used : A person wanting to lock in an exchange rate for the payment of a foreign-currency obligation to someone else would:

Reviews

Write a Review

 

Finance Basics Questions & Answers

  What is her portfolios beta

An individual has $30,000 invested in a stock with a beta of 0.7 and another $45,000 invested in a stock with a beta of 2.5. If these are the only two investments in her portfolio, what is her portfolio's beta? Round your answer to two decimal pla..

  The current price of gold is 900 per ounce and is expected

goldsmith labs recovers gold from printed circuit boards. it has developed new equipment for this purpose. you have

  What annual interest rate are you paying

What is the future value of $6000 at a nominal rate of 6.75% compounder quarterly for 5 years? What is the future value if it is compounded continuously?

  Should the company expand into this business

Sales per year of $350,000 and cost of production of $100,000. 35% tax rate. 10% required return on project. Should the company expand into this business?

  At what level of total new financing will retained earnings

A firm expects to have available $500,000 of earnings in the coming year, which it will retain for reinvestment purposes. Given the following target capital structure, at what level of total new financing will retained earnings be exhausted?

  Cash flow for dividend distributions to shareholders

1.) How should this company use its free cash flow for dividend distributions to shareholders or repurchasing of stock?

  What is the banks cost of preferred stock

Sixth Fourth Bank has an issue of preferred stock with a $6.10 stated dividend that just sold for $123 per share. What is the bank's cost of preferred stock?

  Consequently earnings appear lower than normal and this

equity valuations in todays market are arguably too high. many analysts assert that price-toearnings ratios are so

  Will an exclusion result in partial recovery

Will an exclusion result in partial recovery? Illustrate your answer to the previous two questions with examples from the HO.

  Calculate the value of the ending inventory

Calculate the value of the ending inventory and the value of the inventory used (the inventory expense) for the year using both the FIFO and LIFO methods.

  Similarities as well as differences between the goal

Similarities as well as Differences between the goal in throughput costing and Activity Based costing

  Each organization listed has grown significantly over the

each organization listed has grown significantly over the past 5 years. as a result of the growth the organization has

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd