International Finance And Treasury - Study Mode

[#211] Choice of correlation coefficient is between
Correct Answer

(C) Minus 1 to +1

Explanation

Solution: Choice of correlation coefficient is between Minus 1 to +1. The value of the correlation coefficient lies between minus one and plus one, –1 ≤ r ≤ 1. If, in any exercise, the value of r is outside this range it indicates error in calculation.

[#212] Markowitz model presumed generally investors are
Correct Answer

(A) risk averse

Explanation

Solution: Markowitz model presumed generally investors are risk averse. The term risk-averse refers to investors who, when faced with two investments with a similar expected return, prefer the lower-risk option.

[#213] The statements relate to international financial environment. Denote the statements being correct or incorrect. Statement I Foreign exchange risk denotes the variance of domestic currency value of assets, liabilities, or operating income attributable to anticipated changes in exchanges rates. Statement II Foreign exchange exposures denote the sensitivity of the real value of assets, liabilities and operating income to unanticipated changes in exchange rates expressed in its functional currency.
Correct Answer

(D) Statement I is incorrect, but Statement II is correct

[#214] Match the following. List-I List-II a. Increase in Volatlity 1. Rise in option premium b. Increase in interest rate 2. Fall in value of put option c. Increase in price of underlying asset 3. Rise in price of call option
Correct Answer

(B) a-1, b-2, c-3

[#215] The counterpart risk is
Correct Answer

(C) the risk of loss if the other party to a financial contract fails to honour its obligation