FIN 3115/3711: The Forward Rate Differs From the Spot Rate by a Sufficient Amount: International Financial Management Homework, NUS, Singapore

Question 1. The forward rate differs from the spot rate by a sufficient amount to offset the interest rate differential between two currencies is called:
Select one:

a. interest rate parity

b. covered interest arbitrage

c. Triangular arbitrage

d. Locational arbitrage

e. none of these

Question 2. Buyer __of___ options premium and___ strike price.

Select one:

a. put, pays, receives

b. put, receive, pays

c. put, pays, pays

d. call, receives, receives

e. call, pays, receives

Question 3. You have the following quotations on the Chinese yuan (CNY) against the Australian dollar (A$) at the HSBC Bank in China and National Australia Bank in Australia. Can you make a locational arbitrage profit? If yes, calculate the arbitrage profit in percentage. (enter two decimal number without sign or symbol)

 

Question 4. Currency options____ are said to be____when the present___ exceeds the
Select one:

a. call, in-the-money, spot rate, strike price

b. call, out-of-the-money, spot rate, strike price

c. put, in-the-money, spot rate, strike price O d. put, out-of-the-money, strike price, spot rate

e. None of these

Question 5. You have the following financial market information. You also have 1.26 million Australian dollar (A$) or 3.04 million Thai baht (THB) to make a profit due to covered interest arbitrage (CIA). Calculate the profit in percentage if the CIA opportunity exists in the market. (enter the two decimal number without sign and symbol)

Question 6. That Amcor can issue bonds worth A$6.71 million that the current exchange rate of the Swiss franc is A$1.2016, and that the forecasted exchange rate of the franc in each of the next three years is A$1.4774, what is the annual cost in the percentage of financing for the franc-denominated bonds? (enter the two decimal number without sign or symbol)

Question 7. A formal agreement between two counterparties to exchange a series of different currency-denominated interest payments for an agreed period of time, and at maturity, the principal amounts in different currencies are exchanged at a pre-agreed rate.

Select one:

a. Currency swaps

b. Interest rate swaps

c. Plain vanilla interest rate swaps

d. None of these

Question 8. The of triangular arbitrage ensures that:\

Select one:

a. quoted exchange rates are similar across banks at different locations

b. cross exchange rates are properly set

c. forward exchange rates are properly set

d. None of these

e. The foreign currency will appreciate or depreciate against the home currency

Question 9. ___and___ are offered by a foreign borrower to investors in a national capital market denominated in the nation’s currency.
Select one or more:

a. Samurai bond

b. Kangaroo bond

c. Eurobond

d. Dim sum bond

e. Masala bond

Question 10. Borrow the currency denominating the receivables, convert it to the local currency and invest it. then pay off the loan with cash inflows from the receivables. This technique for hedging transaction exposure is called: 

Select one: a. money market hedge

b. futures hedge

c. forward hedge

d. currency options hedge

e. None of these

Question 11. ____of Forward is____ and futures is ____

Select one:

a. Size of contract, tailored to individual needs, standardized

b. Size of contract, standardized, tailored to individual needs

c. Delivery date, standardized, tailored to individual needs

d. Liquidation, very few by delivery, most settled by actual delivery

e. All of these

Question 12. A contractual agreement between two parties to exchange periodic payments related to fixed-for-floating or floating-for-fixed interest rates based on an agreed-upon notional amount of a single currency for a specific maturity.

Select one:

a. Interest rate swaps

b. Currency swaps

c. Plain vanilla interest rate swaps

d. None of these

Question 13. Strategy is used by a multinational company to stall payments, normally in response to exchange rate projections.

Select one:

a. Lagging

b. Leading

c. Optimal hedging

d. Overhedging

e. None of these

Question 14. You have the following quotations for the Chinese yuan (CNY) and the Australian dollar (A$) at the HSBC Bank in China and National Australia Bank in Australia. Can you make a locational arbitrage profit? If yes, calculate the arbitrage profit if you have A$2.00 million or CNY3.02 million. (enter the whole number without sign or symbol)

 

Question 15.  Arbitrage strategy is:
Select one:

a. Action to capitalise on a discrepancy in quoted price o

b. Buying currency at a low price from one location and sell it immediately at a higher price in another location 0

c. Making profit after transaction cost

d.none of these

e. investing money at higher  interest rate to make a profit

Question 16.  Which of the following are eurocurrencies?
Select one or more:

a. A deposit of Australian dollars in OCBC bank in Singapore.

b. A deposit of Japanese yen held by a Japanese company and held at ANZ bank in Sydney.

c. A British pound deposit owned by a Chinese company and held in Barclay’s Bank in London.

d. A Euro deposit owned by a German company and held in Paribas Bank in Paris.

e. A US dollar deposit owned by an American resident and held in HSBC Bank in New York.

Question 17. An agreement regarding a position in a specified currency, a specified exchange rate, and a specified future settlement date. Payment is made by one party to the other based on the exchange rate at the future date. This agreement is called:
Select one:

a. Non-deliverable forward contract

b. forward contract

c. futures contract

d. options contract

e.None of these

 

Question 18. As an investor from Australia, what factors would you consider before investing in emerging markets?
Select one or more:

a. Potential for diversification

b. The quality of corporate governance in the country

c. Direct purchases of foreign stocks

d. Investment in MNC stocks

e. International mutual funds

Question 19. _____and ____are sold to investors in a capital market other than the country that issued the denominating currency.
Select one or more:

a. Dim sum bond

b. Masala bond

c. Yankee bond

d. Bulldogs bond

e.Foreign bond