International Finance And Treasury - Study Mode

[#651] Denominations in which Eurobonds are issued are
Correct Answer

(B) $5000 and $10000

Explanation

Solution: Denominations in which Eurobonds are issued are $5000 and $10000. Most Eurobonds are investment-grade. Denominations are stipulated as lots or pieces, which is the amount of currency of the issue of 1000, 5000, or 50,000 lots or pieces.

[#652] The external method of hedging transaction exposure does not include
Correct Answer

(C) Cross hedging

Explanation

Solution: The external method of hedging transaction exposure does not include Cross hedging. A cross hedge is used to manage risk by investing in two positively correlated securities that have similar price movements. The investor takes opposing positions in each investment in an attempt to reduce the risk of holding just one of the securities.

[#653] The cost of hedging through option includes
Correct Answer

(C) Both a and b

Explanation

Solution: The cost of hedging through option includes Option premium and Interest on option premium till due date of the contract.

[#654] Foreign currency exposures can be avoided by
Correct Answer

(B) Denominating the transaction in domestic currency

Explanation

Solution: Foreign currency exposures can be avoided by denominating the transaction in domestic currency. Foreign Exchange Exposure refers to the risk associated with the foreign exchange rates that change frequently and can have an adverse effect on the financial transactions denominated in some foreign currency rather than the domestic currency of the company.

[#655] Forward contract is an agreement to buy or sell an assets on
Correct Answer

(A) Specified price

Explanation

Solution: Forward contract is an agreement to buy or sell an assets on Specified price. A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date.