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LOS h: Describe the characteristics of currency forward contracts.
Q1. Macklin Metals has received 80 million pounds sterling. The company plans to spend $120 million on a project in the United States in 90 days. Macklin inters into a cash settlement currency forward to exchange the pounds for U.S. dollars at a rate of $1.50 per pound in 90 days. If the exchange rate is $1.61 per pound at the settlement date, the cash settlement Macklin will pay or receive is closest to:
A) $8.8 million receipt.
B) $8.8 million payment.
C) $5.5 million payment.
Q2. Which of the following statements regarding currency forward contracts is least accurate?
A) If the domestic currency appreciates over the term of the contract, the party that is long the foreign currency will have losses on the contract.
B) A long position in a currency that appreciates more than expected over the term of the contract will have a positive value at contract expiration.
C) Currency forward contracts can be settled in cash or by delivery.
Q3. An agreement that requires the parties to exchange a certain amount of Yen for a certain amount of Euros on a specific date in the future is called a(n):
A) exchange rate agreement.
B) foreign exchange future.
C) currency forward contract.
Q4. A currency forward contract:
A) requires a payment at settlement based on London Interbank Offered Rate.
B) is priced using the future interest rate on a foreign currency.
C) can be a deliverable contract.
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发表于 2009-3-2 09:58
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