QUESTION 5

1. A put option on UK pounds has a strike price of $2.05/ and a cost of $0.02. What is the break-even price for the option?

		A) $2.03/
		B) $2.05/.
		C) $2.07/
		D) The answer depends upon if this is a long or a short call option

QUESTION 6

1. Andrea Cujoli is a currency speculator who enjoys betting on changes in the foreign currency exchange market. Currently the spot price for the Japanese yen is 129.87/$ and the 6-month forward rate is 128.53/$. Andrea thinks the yen will move to 128.00/$ in the next six months. Andrea should _______ to profit from changing currency values.

		a) do nothing
		b) buy dollar
		c) sell yen
		d) sell dollar

QUESTION 7

1. A _______ is the term used to describe a foreign currency agreement between two parties to exchange a given amount of one currency for another, and after a period of time, to give back the original amounts.

		a) matched flow
		b) currency swap
		c) back-to-back loan
		d) credit swap

QUESTION 8

1. An agreement to exchange interest payments based on a fixed payment for those based on a variable rate (or vice versa) is known as a/an:

		A) forward rate agreement.
		B) interest rate future.
		C) interest rate swap.
		D) all of the above

QUESTION 9

1. Which following statement is Incorrect?

		A). A forward exchange agreement between currencies states the rate of exchange at which a foreign currency will be bought forward or sold forward at a specific date in the future.
		B). The spot and forward exchange rates are constantly in the state of equilibrium described by interest rate parity.
		C). The degree to which the prices of imported and exported goods change as a result of exchange rate changes is termed pass-through.
		D). If the identical product or service can be sold in two different markets; and no restrictions exist on the sale; and transportation costs of moving the product between markets are equal, then the products price should be the same in both markets. This is called the law of one price.