International Finance And Treasury - Study Mode

[#291] Agreement between two parties to exchange cash flows in future and cash flows are based on underlying instruments is classified as
Correct Answer

(A) swaps

Explanation

Solution: Agreement between two parties to exchange cash flows in future and cash flows are based on underlying instruments is classified as swaps. A swap is a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments.

[#292] Number of shares outstanding are 10000 and price of stock is $50 then current market price is
Correct Answer

(C) $500,000

Explanation

Solution: Current market price = Number of shares outstanding × Price of stock = 10000 × $50 = $500,000.

[#293] Consider buying put option, if price is lower at expiration date of option then the
Correct Answer

(D) profit will be higher

Explanation

Solution: Consider buying put option, if price is lower at expiration date of option then the profit will be higher. A person would buy a put option if they expected the price of the underlying futures contract to move lower. A put option gives the buyer the right to sell the underlying futures contract at an agreed-upon price called the strike price any time before the contract expires.

[#294] If stock price of call option is $300 and exercise price of call option is $260 then intrinsic value of option is
Correct Answer

(C) $40

Explanation

Solution: Intrinsic value of option = Stock price of call option - Exercise price of call option = $300 - $260 = $40.

[#295] Type of preferred stock whose paid dividends are more than promised dividends is classified as
Correct Answer

(D) participating preferred stock

Explanation

Solution: Type of preferred stock whose paid dividends are more than promised dividends is classified as participating preferred stock. Participating preferred stock is a type of preferred stock that gives the holder the right to receive dividends equal to the customarily specified rate that preferred dividends are paid to preferred shareholders, as well as an additional dividend based on some predetermined condition.