International Finance And Treasury - Study Mode

[#366] Position which came in to existence because of holding assets less than liabilities is considered as
Correct Answer

(D) net short in currency

Explanation

Solution: Position which came in to existence because of holding assets less than liabilities is considered as net short in currency. An investor who is net short has more short positions than long positions in a given asset, industry, market, or portfolio.

[#367] Theory according to which difference between expected appreciation and foreign interest must be equal to domestic interest rate is called
Correct Answer

(A) interest rate parity theorem

Explanation

Solution: Theory according to which difference between expected appreciation and foreign interest must be equal to domestic interest rate is interest rate parity theoremcalled. Interest rate parity (IRP) is a theory in which the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate.

[#368] Rule which states that similar set of goods and services produced in various countries should have equal price is classified as
Correct Answer

(D) law of one price

Explanation

Solution: Rule which states that similar set of goods and services produced in various countries should have equal price is classified as law of one price. The law of one price is an economic concept that states that the price of an identical asset or commodity will have the same price globally, regardless of location, when certain factors are considered.

[#369] Intrinsic value of call option is considered as out of money if
Correct Answer

(D) stock price < exercise price

Explanation

Solution: Intrinsic value of call option is considered as out of money if stock price < exercise price. The intrinsic value of both call and put options is the difference between the underlying stock's price and the strike price. In the case of both call and put options, if the calculated value is negative, the intrinsic value is zero.

[#370] Residual claims, limited rights, limited liability and dividend payments on discrete basis are considered as
Correct Answer

(C) characteristics of common stock

Explanation

Solution: Residual claims, limited rights, limited liability and dividend payments on discrete basis are considered as characteristics of common stock. Common stock is a security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy.