Global Finance
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1. A futures contract is an agreement between a bank and a customer that calls for delivery at a fixed future date, of a specified amount of one currency against dollar payment, and the exchange rate is fixed at the time the contract is entered into.
a- True.
b- False.
2. Transaction exposure is the extend to which a given exchange rate changes the value of foreign currency. .
a- True.
b- False.
3. If a country is continuously importing more than it is exporting
a- Its currency will be depressed.
b- Its currency will appreciate.
c- Countries it is importing from will experience a decline in their currency.
d- The country needs to reduce their budget deficit.
e- None of the above.
4. The risk of experiencing a decline in profits due to a change in foreign exchange value is called:
a- Political risk.
b- Foreign exchange risk.
c- Interest rate risk
d- Translation exposure
e- Foreign government policies risk.
5. Which of the following is an international parity condition?
a- Fluctuation
b- International Forecasting Effect (IFE).
c- Counter Trade.
d- Purchasing Power Parity (PPP)
e- Inflation Rate Parity (IRP).
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Answer 1: TRUE
This is the definition of a futures contract. A Forward is also similar to a future.
Answer 2: TRUE
Transaction exposure is the extent to which income from individual transactions is affected by fluctuations in foreign exchange values.
Answer 3: (a) ...
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