Deck 5: Financial Markets and Instruments

Question 1

Money market instruments include all the following, except _____________

A)Commercial papers
B)T -Bills
C)Certificate of Deposit
D)Equity shares

Answer 1

Equity shares

Question 2

In Quote of 1$ = Rs.61, __________ is a home country.

A)India
B)US
C)France
D)Australia

Answer 2

India

Question 3

If USD /CAD 1.1630, 3 months forward 1. 1675.Annualized interest rate CAD 6%, USD 4%. Arbitrage gain will be_____________

A)0
B)1078
C)1087
D)1870

Answer 3

1087

Question 4

PPP theory ____________government intervention.

A)Ignores
B)Includes
C)Requires
D)Fishers

Question 5

________ theory states that exchange rate between two currencies is directly affected by their interest rates.

A)IRP
B)PPP
C)Fisher`s
D)Home Foreign

Question 6

If formula I of Fishers effect is positive, Borrow ___________ , invest __________.

A)Foreign, Home
B)Foreign, Foreign
C)Home, Home
D)Home Foreign

Question 7

__________ is a standardized contract to exchange one currency for another at a special date in the future at a price (exchange rate) that is fixed on the purchase date.

A)Futures Contract
B)Options Contract
C)Swaps
D)Forward contract

Question 8

The _______ requires that an upfront margin to trade on an exchange.

A)Currency forwards
B)Currency options
C)Currency FTF`s
D)Currency Futures

Question 9

Which of the following is false ________

A)Futures contracts trade on a financial exchange
B)Futures contracts are more liquid than forward contracts
C)Futures contracts are marked to market
D)Futures contracts allow fewer delivery options than forward contracts

Question 10

Which of the following does the most to reduce default risk for futures contracts_________

A)High liquidity
B)Flexible delivery arrangements
C)Marking to market
D)Credit checks for both buyers and sellers

Question 11

Foreign currency forward market is ___________

A)An over the counter unorganized market
B)Organized market without trading
C)Organized listed market
D)Unauthorized listed market

Question 12

Which of the following financial instruments is primarily used to transfer risk _____________

A)Bonds
B)Home Mortgages
C)Futures Contract
D)Stocks

Question 13

An option giving the buyer of the option the right but not the obligation to buy a currency is _____________

A)Call option
B)Put option
C)Forward option
D)Future option

Question 14

Regulation _________ of federal Reserve Act imposed a ceiling on interest rates that could be paid on deposits by Banks in the US.

A)P
B)Q
C)R
D)M

Question 15

__________ bond is issued in a local market by a foreign borrower, denominated in local currency.

A)Foreign
B)Euro
C)Domestic
D)Euro Credit

Question 16

___________ once issued bonds with coupon rates tied to its financial performance.

A)Electrolux
B)Wait Disney
C)Japan
D)Infosys

Question 17

______________ is type of security listed on Luxembourg.

A)ADR
B)GDR
C)IDR
D)CDR

Question 18

Level _________ ADR `s must comply with various SEC rule, including full registration and reporting requirements of SEC.

A)I
B)II
C)III
D)IV

Question 19

ADR `s are dominated in _______ currency.

A)US $
B)Euro
C)GBP
D)INR

Question 20

In ADR and GDR process, _______ issues the depository Receipts in Foreign Markets.

A)Custodian bank
B)Depository Bank
C)Issuing Company
D)Lead manager

Question 21

The Dow Jones Industrial Average (DJIA) contains _________ of the largest and most influential companies (blue chip companies) is the US__________

A)35
B)25
C)40
D)30

Question 22

Required Return from an investment =____________

A)Risk free return + Risk premium
B)Risk free Return - Risk Premium
C)Risk free return x Risk premium
D)Risk free Return / Risk Premium

Question 23

An unsponsored ADR, __________

A)Complies with regulatory reporting
B)Is listed on International stock exchanges
C)Trades in OTC market
D)Is issued by a bank on behalf of foreign company whose equity serves as underlying asset

Question 24

________ was introduced at a time when forex reserves of the country were low.

A)FERA
B)FEMA
C)GATT
D)IMF