International Finance And Treasury - Study Mode

[#731] Type of contract which involves future exchange of assets at a specified price is classified as
Correct Answer

(D) forward contract

Explanation

Solution: Type of contract which involves future exchange of assets at a specified price is classified as forward contract. A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date.

[#732] When price of underlying asset increases then good option is
Correct Answer

(A) buy call option

Explanation

Solution: When price of underlying asset increases then good option is buy call option. Buying a call option entitles the buyer of the option the right to purchase the underlying futures contract at the strike price any time before the contract expires.

[#733] Capital gain is subtracted from return to stockholders to calculate
Correct Answer

(A) periodic dividend payments

Explanation

Solution: Capital gain is subtracted from return to stockholders to calculate periodic dividend payments. Dividends are payments made by publicly-listed companies or funds as a reward to investors for putting their money into the venture. They can be paid as cash or in the form of stock.

[#734] Consider call option writing, probability that a buyer would have positive payoff increases with the
Correct Answer

(B) decrease in stock price

Explanation

Solution: Considering call option writing, probability that a buyer would have positive payoff increases with the decrease in stock price. Writing a call option means that you are selling a call option. If you sell a call (also know as a "short call") then you are obliged to sell stock at the strike price.

[#735] Right of stockholders of firm that new shares must be offered to existing stockholders first rather than new stock holders is classified as
Correct Answer

(B) pre-emptive rights

Explanation

Solution: Right of stockholders of firm that new shares must be offered to existing stockholders first rather than new stock holders is classified as pre-emptive rights. Preemptive rights are a clause in an option, security or merger agreement that gives the investor the right to maintain his or her percentage ownership of a company by buying a proportionate number of shares of any future issue of the security.