International Finance And Treasury - Study Mode

[#726] Security which has characteristics of common stock and bonds both at same time is classified as
Correct Answer

(A) preferred stock

Explanation

Solution: Security which has characteristics of common stock and bonds both at same time is classified as preferred stock. Preferred stock (also called preferred shares, preference shares or simply preferreds) is a form of stock which may have any combination of features not possessed by common stock including properties of both an equity and a debt instrument, and is generally considered a hybrid instrument.

[#727] Type of option that can be exercised before date of expiration as well as on expiry date is classified as
Correct Answer

(B) American option

Explanation

Solution: Type of option that can be exercised before date of expiration as well as on expiry date is classified as American option. An American option is a version of an options contract that allows holders to exercise the option rights at any time before and including the day of expiration. Another version or style of option execution is the European option that allows execution only on the day of expiration.

[#728] Intrinsic value of an option is $490 and price of underlying asset is $290 then exercise price of an option is
Correct Answer

(C) $490

[#729] Underwriter spread of stock is added to net proceeds to calculate value of
Correct Answer

(B) Gross proceeds

Explanation

Solution: Underwriter spread of stock is added to net proceeds to calculate value of Gross proceeds. Gross Proceeds means the aggregate purchase price of all Shares sold for the account of the Company through an Offering, without deduction for Selling Commissions, volume discounts, any marketing support and due diligence expense reimbursement or Organization and Offering Expenses.

[#730] In interest rate swap transaction, party who pays floating payments of interest is considered as
Correct Answer

(D) swap seller

Explanation

Solution: In interest rate swap transaction, party who pays floating payments of interest is considered as swap seller. A swap is an agreement between two parties to exchange sequences of cash flows for a set period of time.