To find the swap rate for a 3 year swap you would a

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83) To find the swap rate for a 3-year swap, you would A) take the arithmetic average of the 1-, 2-, and 3-year forward rates. B) take the geometric average of the 1-, 2-, and 3-year forward rates. C) bootstrap the LIBOR yield curve. D) none of the options Answer: B Topic: Hedging Recurrent Exposure with Swap Contracts Accessibility: Keyboard Navigation
84) Generally speaking, a firm with recurrent exposure can best hedge using which product? A) Options B) Swaps C) Futures D) all of the options Answer: B Topic: Hedging Recurrent Exposure with Swap Contracts Accessibility: Keyboard Navigation 85) The current exchange rate is €1.25 = £1.00 and a British firm offers a French customer the choice of paying a £10,000 bill due in 90 days with either £10,000 or €12,500. A) The seller has given the buyer an at-the-money put option. B) The seller has given the buyer an at-the-money call option. C) The seller has given the buyer both an at-the-money put option, as well as an at-the-money call option. D) none of the options Answer: C Topic: Hedging through Invoice Currency 86) The current exchange rate is €1.25 = £1.00 and a British firm offers a French customer the choice of paying a £10,000 bill due in 90 days with either £10,000 or €12,500. A) The seller has given the buyer an at-the-money put option on euro with a strike in pounds. B) The seller has given the buyer an at-the-money put option on pounds with a strike in euro. C) The seller has given the buyer an at-the-money call option on euro with a strike in pounds. D) none of the options Answer: A Topic: Hedging through Invoice Currency 87) An exporter can shift exchange rate risk to their customers by A) invoicing in their home currency. B) invoicing in their customer's local currency. C) splitting the difference, and invoicing half of sales in local currency and half of sales in home currency. D) invoicing sales in a currency basket such as the SDR as the invoice currency. Answer: A Topic: Hedging through Invoice Currency Accessibility: Keyboard Navigation
88) An exporter can share exchange rate risk with their customers by A) invoicing in their customer's local currency. B) splitting the difference, and invoicing half of sales in local currency and half of sales in home currency. C) invoicing sales in a currency basket such as the SDR as the invoice currency. D) splitting the difference, and invoicing half of sales in local currency and half of sales in home currency, as well as invoicing sales in a currency basket such as the SDR as the invoice currency. Answer: D Topic: Hedging through Invoice Currency Accessibility: Keyboard Navigation

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