International Finance And Treasury - Study Mode

[#301] Difference between price of underlying asset and exercise price of option is classified as
Correct Answer

(B) intrinsic value of option

Explanation

Solution: Difference between price of underlying asset and exercise price of option is classified as intrinsic value of option. The intrinsic value of an option represents the current value of the option, or in other words how much in the money it is. When an option is in the money, this means that it has a positive payoff for the buyer.

[#302] As compared to public issues, interest premiums on privately placed issues overtime have
Correct Answer

(C) decreased

Explanation

Solution: As compared to public issues, interest premiums on privately placed issues overtime have decreased.

[#303] Price of treasury notes and treasury bonds without including accrued interest is classified as
Correct Answer

(A) clean price

Explanation

Solution: Price of treasury notes and treasury bonds without including accrued interest is classified as clean price. The clean price is the price of a coupon bond not including accrued interest payments.

[#304] Type of bonds which is fully backed by credit and faith of issuer is classified as
Correct Answer

(C) general obligation bonds

Explanation

Solution: Type of bonds which is fully backed by credit and faith of issuer is classified as general obligation bonds. A general obligation bond (GO) is a municipal bond backed by the credit and taxing power of the issuing jurisdiction rather than the revenue from a given project.

[#305] Single bid auction of TIPS securities means that all bidders
Correct Answer

(B) pays same price

Explanation

Solution: Single bid auction of TIPS securities means that all bidders pays same price. In the single-price format - all bids accepted by the Treasury are awarded at the same interest rate which is the highest yield of accepted competitive bids.