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    Quiz 03

    Uploaded by

    Mehrab Jami Aumit 1812818630
    International Finance

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    © All Rights Reserved
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    Quiz 03

    Uploaded by

    Mehrab Jami Aumit 1812818630
    20 views2 pages
    International Finance

    Copyright

    © © All Rights Reserved

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    PDF, TXT or read online from Scribd

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    International Finance

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    20 views2 pages

    Quiz 03

    Uploaded by

    Mehrab Jami Aumit 1812818630
    International Finance

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    Quiz 03

    1. Reed is a UK-based MNC that frequently imports raw materials from Japan. Reed is
    typically invoiced for these goods in Japanese Yen and is concerned that the Japanese
    Yen will appreciate against British Pound in the near future. Which one(s) of the
    following is an appropriate hedging technique for Reed under these circumstances?
    (Select Multiple If Needed) *

    a) Purchase Japanese Yen Forward


    b) Purchase Japanese Yen Call Options
    c) Purchase British Pound Call Option
    d) Purchase Japanese Yen Put Options

    2. Shahid Afridi sold a put option on Pakistani Rupee (PKR) for $.00021 per unit. The
    strike price was $1=160 PKR and the spot rate at the time of expiration was $1=158
    PKR. Assume there are 325000 units in a PKR option. What was Afridi’s net
    profit/loss on the option? (Answer Format: $2500.21 or -$2500.21) (You must round
    up to two decimal points) *

    Your answer

    3. Suppose, you sold a future contract on 50000 Dollars where the future rate is $1=185
    LKR. At the date of expiration, the spot rate is $1=187 LKR. You already bought
    $30000 at $1=183 LKR before the contract expiration date. How much profit or loss
    you are going to make in this scenario? *

    a) Loss 100000 LKR


    b) Profit 20000 LKR
    c) Loss 20000 LKR
    d) Profit 100000 LKR

    4. A conditional British Pound put option is selling at premium of 2 Baht per unit with
    an exercise price of 38.5 Baht. If the trigger value is 39.5 Baht and the spot rate is 39
    Baht, which one(s) of the following are true? (Select Multiple If Needed) *

    a) Option will be exercised and there will be profit.


    b) Option will not be exercised and the loss will be 0.
    c) Option will not be exercised but the premium must be paid.
    d) Option will not be exercised and the loss will be premium.
    5. In a put option, the exercise price is 1 Croatian Kuna=0.14 Euro with a premium of
    0.01 Euro Per Kuna. If the put option is out of the money which one(s) of the following
    could be true. (Select Multiple If Needed) *

    a) Spot Price is 1 Kuna=0.15 Euro


    b) Spot Price=Exercise Price
    c) There will be no loss in the option.
    d) Put option must be exercised

    6. An exporting business is to receive 10 million Brazilian Reals (BRL) in 3 months. It


    gets a Non-Deliverable Forward against Euro at the rate of 3.10. The implementation
    of this contract is destined to guarantee the exporter a minimum conversion rate, that
    is to say, the receipt of 10,000,000/3.10 = EUR 3,225,806.40 against the sale of
    Brazilian Reals. 3 months later, if the Euro/BRL rate is 3.15, Which one of them is
    true? (Select Multiple If Needed) *

    a) The exporter will make loss.


    b) The bank will make extra profit.
    c) The exporter will pay the difference to the bank.
    d) The bank will pay the difference to the exporter.

    7. A straddle is a good strategy if you think the underlying security will experience a
    large price movement in the near future but are unsure of the direction.

    a) True
    b) False

    8. Decrease in spot rate will result in decrease in profit for put option seller. *

    a) True
    b) False

    9. A UK corporation has purchased currency call options to hedge a 70,000-dollar


    payable. The premium is £0.02 and the exercise price of the option is £0.54. If the spot
    rate at the time of maturity is £0.52, what is the total amount paid by the corporation
    to buy dollars if it acts rationally?

    a) £3920
    b) £38850
    c) £1400
    d) £37800

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