Question 1

The price paid by the buyer to the seller for an option contract is called a _____.

Accepted Answer

A)  call option
B)  put option
C)  premium
D)  currency swap
E)  marked-to-marketF) All of the above
G) None of the above

Question 2

Selling a currency in a currency futures contract and profiting on a decrease in the value of the currency over time is called  _____.

Accepted Answer

A)  hedging
B)  syndicating
C)  a short position
D)  a long position
E)  marked-to-market exchange positionF) None of the above
G) C) and E)

Question 3

When a bank sells a LC into the financial marketplace as a money market instrument, it is called a(n) _____.

Accepted Answer

A)  payment in advance
B)  commercial letter of credit
C)  banker's acceptance
D)  syndicate
E)  bond ratingF) D) and E)
G) B) and E)

Question 4

Bank and government loans used by exporters to finance working capital are called trade financing.

Accepted Answer

A) True 
 B)False

Question 5

The sensitivity of a stock to market risk affected by currency movements is called the weighted average cost of capital.

Accepted Answer

A) True 
 B)False

Question 6

The flexibility to unwind forex hedges when they are no longer needed is a convenient advantage.

Accepted Answer

A) True 
 B)False

Exam 14: Global Financial Management

When a bank sells a LC into the financial marketplace as a money market instrument, it is called a(n) _____.