AIM 1: Describe the different sources of foreign exchange risk exposure.
1、In assessing foreign exchange risk, a negative net exposure in a given currency occurs when:
A) the value of the currency is more likely to fall than rise.
B) more liabilities than assets are held in a given currency.
C) more assets than liabilities are held in a given currency.
D) a net long position in the currency is held.
The correct answer is B
A bank has a negative currency exposure if it holds more liabilities than assets in a given currency.
2、A positive net exposure position applies when:
A) the financial institution is net short in a currency.
B) fewer assets than liabilities are held in a given currency.
C) more assets than liabilities are held in a given currency.
D) the financial institution faces the risk that the FX will rise in value against the dollar.
The correct answer is C
More assets than liabilities are held, and in this instance, the financial institution faces the risk that the FX will fall.
AIM 6: Compare on-balance-sheet hedging and off-balance-sheet hedging with forwards.
1、A bank can create an on-balance-sheet hedged position by matching:
A) domestic and foreign cash rate exposure on its balance sheet.
B) domestic and foreign inflation rate exposure on its balance sheet.
C) maturity and currency positions on its balance sheet.
D) domestic and foreign market value positions on its balance sheet.
The correct answer is C
By matching both the maturity and currency positions on its balance sheet, the bank has created a situation where a net return is essentially locked in, no matter what happens to the exchange rate.
2、Assume that the current spot exchange rate between the U.S. dollar and the euro is $1.2500 per The correct answer is B
作者: Baran 时间: 2009-6-30 12:58
First, we need to compute the nominal risk-free interest rates in each country: U.S. nominal rate = (1.03 × 1.02) – 1 = 0.0506 = 5.06%; U.S. continuous rate = ln(1.0506) = 0.0494 Europe nominal rate = (1.04 × 1.025) – 1 = 0.066 = 6.60%; Europe continuous rate = ln(1.066) = 0.0639 Next, we apply the interest rate parity formula:
F0 = S0e(r-rf)T = 1.25e(0.0494-0.0639) ′ 3 = 1.1968
[此贴子已经被作者于2009-6-30 12:58:25编辑过]
3、A European bank exchanges euros for USD, lends them at the U.S. risk-free rate, and simultaneously enters into a forward contract to sell the loan proceeds for euros at loan maturity. If the net effect of these transactions is to earn the risk-free euro rate, it is an example of:
A) interest rate parity.
B) arbitrage.
C) spot-forward equality.
D) the law of one price.
The correct answer is A
Interest rate parity is a situation in which the differential between spot and forward exchange rates is equal to the differential between interest rates for the two different currencies.
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