International Finance And Treasury - Study Mode

[#156] Major participants in forward markets are
Correct Answer

(D) all of above

Explanation

Solution: Major participants in forward markets are commercial banks, broker deals and investment banks.

[#157] Type of bonds that pay coupon interest are classified as
Correct Answer

(C) coupon bond

Explanation

Solution: Type of bonds that pay coupon interest are classified as coupon bond. A coupon bond is a type of bond. The bond issuer borrows capital from the bondholder and makes fixed payments to them at a fixed (or variable) interest rate for a specified period. that includes attached coupons and pays periodic (typically annual or semi-annual) interest payments during its lifetime and its par value.

[#158] For given change in interest rates, percentage change in present value of bond is classified as
Correct Answer

(A) price sensitivity

Explanation

Solution: For given change in interest rates, percentage change in present value of bond is classified as price sensitivity. Price sensitivity can be defined as the degree to which consumers' behaviors are affected by the price of the product or service. Price sensitivity is also known as price elasticity of demand and this means the extent to which sale of a particular product or service is affected.

[#159] Liquidity premium theory, unbiased expectations theory and market segmentation theory are theories to describe
Correct Answer

(B) term structure of interest rate

Explanation

Solution: Liquidity premium theory, unbiased expectations theory and market segmentation theory are theories to describe term structure of interest rate. The liquidity premium theory states that bond investors prefer highly liquid, short-dated securities that can be sold quickly over long-dated ones. The theory also contends that investors are compensated for higher default risk and price risk from changes in interest rates. Unbiased Expectations Theory states that current long-term interest rates contain an implicit prediction of future short-term interest rates. Market segmentation theory is a theory that long and short-term interest rates are not related to each other. It also states that the prevailing interest rates for short, intermediate, and long-term bonds should be viewed separately like items in different markets for debt securities.

[#160] When interest rate is lower than equilibrium rate of borrowing loanable funds then financial system has
Correct Answer

(B) deficit of funds

Explanation

Solution: When interest rate is lower than equilibrium rate of borrowing loanable funds then financial system has deficit of funds.