International Finance And Treasury - Study Mode

[#311] In borrowing and lending of federal funds, federal funds rate is result of function between
Correct Answer

(C) supply and demand

Explanation

Solution: In borrowing and lending of federal funds, federal funds rate is result of function between supply and demand. The federal funds rate refers to the interest rate that banks charge other banks for lending them money from their reserve balances on an overnight basis.

[#312] Type of risk in which value of liabilities and assets is affected by exchange rate is classified as
Correct Answer

(B) foreign exchange risk

Explanation

Solution: Type of risk in which value of liabilities and assets is affected by exchange rate is classified as foreign exchange risk. Foreign exchange risk refers to the losses that an international financial transaction may incur due to currency fluctuations.

[#313] Exchange markets and over counter markets are considered as two types of
Correct Answer

(C) secondary market

Explanation

Solution: Exchange markets and over counter markets are considered as two types of secondary market. A secondary market is a marketplace where already issued securities both shares and debt can be bought and sold by the investors. So, it is a market where investors buy securities from other investors, and not from the issuing company.

[#314] Current market price of common stock is $15 and conversion rate received on conversion is $320 to calculate
Correct Answer

(C) $4,800

Explanation

Solution: Conversion Price = Conversion rate received on conversion × Current market price of common stock = $320 × $15 = $4,800.

[#315] Bonds that are backed by cash flow from project and are sold to finance particular project are classified as
Correct Answer

(B) revenue bonds

Explanation

Solution: Bonds that are backed by cash flow from project and are sold to finance particular project are classified as revenue bonds. Revenue bonds are municipal bonds that finance income-producing projects and are secured by a specified revenue source. Typically, revenue bonds can be issued by any government agency or fund that is managed in the manner of a business, such as entities having both operating revenues and expenses.