International Finance And Treasury - Study Mode

[#396] Federal funds, bankers acceptance, commercial paper and repurchase agreements are classified as
Correct Answer

(C) money market instruments

Explanation

Solution: Federal funds, bankers acceptance, commercial paper and repurchase agreements are classified as money market instruments. There are several money market instruments in most Western countries, including treasury bills, commercial paper, bankers' acceptances, deposits, certificates of deposit, bills of exchange, repurchase agreements, federal funds, and short-lived mortgage- and asset-backed securities.

[#397] In financial transactions, risk that there will be no profit in selling of this asset is classified as
Correct Answer

(A) price risk

Explanation

Solution: In financial transactions, risk that there will be no profit in selling of this asset is classified as price risk. Price risk is the potential for the decline in the price of an asset or security relative to the rest of the market. It excludes market risk, or the potential for an entire market to go down in value. As such, price risk is the component of investing risk that can be reduced with diversification.

[#398] The forward market is especially well-suited to offer hedging protection against.
Correct Answer

(B) transactions risk exposure

Explanation

Solution: The forward market is especially well-suited to offer hedging protection against transactions risk exposure. Transaction exposure, defined as a type of foreign exchange risk faced by companies that engage in international trade, exists in any worldwide market. It is the risk that exchange rate fluctuations will change the value of a contract before it is settled.

[#399] The euro is the name for
Correct Answer

(C) a common European currency

Explanation

Solution: The euro is the name for a common European currency. On January 1, 1999, the European Union introduced its new currency, the euro. Originally, the euro was an overarching currency used for exchange between countries within the union, while people within each nation continued to use their own.

[#400] What basis the exchange rates are determined
Correct Answer

(C) Demand and supply

Explanation

Solution: On demand and supply basis the exchange rates are determined. The demand–supply model of exchange rate determination implies that the equilibrium exchange rate changes when the factors that affect the demand and supply conditions change.