practice_final_solutions[1]

practice_final_solutions[1] - Note: This sample is for the...

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Note: This sample is for the purpose of practicing. You must review all relevant materials for the final examination. Simply working on this sample without a comprehensive review will very likely result in low grade in the actual final examination. 1 Fin 536 Practice Final solutions Name: ___________________________ID______ PART I Multiple Choice (** pts, 2 points each) 1. A bank quotes the following rates for euro and U.S. dollar: $1.1840-60/€. Which one of the following statements is true? A) The ask price of U.S. dollar is €0.8446. B) The ask price of U.S. dollar is €0.8432. C) The ask price of U.S. dollar is $1.1860. D) The bid price of U.S. dollar is €0.8446. E) The bid price of U.S. dollar is $1.1840. 2. A forward contract to deliver British pounds for U.S. dollars could be described either as _________________ or _______________. A) buying dollars forward; buying pounds forward B) selling pounds forward; selling dollars forward C) selling pounds forward; buying dollars forward D) selling dollars forward; buying pounds forward E) None of the above 3. Which of the following is NOT a difference between a currency futures contract and a forward contract? A) Futures are traded in exchange markets with standard contract size and delivery dates whereas forwards are traded over the counter. B) A futures contract has lower price than a comparable forward contract because it is more convenient to buy or sell futures contracts and credit risk is minimum in futures contracts. C) There is more default risk in forward trading than future trading. D) The margin account of future trading is resettled daily (marking-to-market), whereas forwards settle at maturity. E) Sellers of futures could avoid deliver foreign currency in the contract if they reverse their position before expiration date whereas sellers of forward are committed to delivering foreign currencies in the contract. 4. Which of the following statements is incorrect ? A) Price of currency futures will always be the same as the spot price on maturity because of price convergence in futures. B)
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This note was uploaded on 09/06/2011 for the course FIN 536 taught by Professor Staff during the Spring '11 term at S.F. State.

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practice_final_solutions[1] - Note: This sample is for the...

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