International Finance and Treasury – Set 6 January 29, 2025 by aasi Home › Management › International Finance and Treasury International Finance and Treasury International Finance and Treasury – Set 6 📝 Model Practice Set ⚡ Instant Answers & Explanation 🎯 Exam Oriented 0% Report a question What’s wrong with this question? You cannot submit an empty report. Please add some details. 1234567891011121314151617181920212223242526272829303132333435363738394041424344454647484950 International Finance and Treasury – Set 6 Dear ! This is International Finance and Treasury – Set 6 Quiz and it contains 50 questions. Keep Learning! 1 / 50 1) For specific basket of goods and services, rise in price on continual basis is considered as fall in globalization rise in globalization rise in demand inflation 2 / 50 2) Sum of past deficit of budget if accumulated is considered as global surplus national debt international debt global debt 3 / 50 3) If intrinsic value of an option is $450 and price of an option is $560 then time value of an option is $110 $1,010 $450.00 $560 4 / 50 4) Monetary expansion increases and there is decrease in equilibrium interest rate then supply curve of funds must shift up and to left up and to right down and to left down and to right 5 / 50 5) Price of an option is subtracted form time value of option to calculate book value index market index intrinsic value extrinsic value 6 / 50 6) To create situation with no shortage of funds, relationship between funds supplied and funds demanded must have Two way relationship One way relationship direct relationship inverse relationship 7 / 50 7) Shift of demand curve to down and to left then there must be support from World Bank decreases in funds traded increase in funds traded rise of international funds 8 / 50 8) Loans for cars and home appliances is classified as loans for durable goods non-durable goods equilibrium goods non-equilibrium goods 9 / 50 9) If equilibrium interest rate decreases and curve of funding supplied shifts to right and downwards then impact on spending is increase in near term decrease in near term increase in long term decrease in long term 10 / 50 10) If equilibrium interest rate increases and curve of funding supplied shifts to left then impact on spending is increase in near term decrease in near term increase in long term decrease in long term 11 / 50 11) Monetary expansion decreases and there is increase in equilibrium interest rate then supply curve of funds must shift down and to left down and to right up and to left up and to right 12 / 50 12) Earned interest rate which is reinvested in other investment is classified as compound interest investment risk interest rate stated rate 13 / 50 13) Consider call option writing, probability that a buyer would have positive payoff increases with the increase in stock price decrease in stock price increase in maturity duration decrease in maturity duration 14 / 50 14) If equilibrium interest rate increases with respect to increase in interest rate, then movement along supply of funds curve is shift left shift right upside movement downside movement 15 / 50 15) Funds demand which is pushed by users of funds in financial markets are classified as supply of loan-able funds demand of loan-able funds compounded funds savings funds 16 / 50 16) In financial markets, decrease in investment results in increase in interest rate decrease in interest rate increase in availability decrease in availability 17 / 50 17) Preferred stock is considered as hybrid security because it includes representation of ownership interest fixed periodic payment higher liquidity both a and b 18 / 50 18) Participants of financial system reduce demand for their funds if economic growth in domestic market is stagnant domestic market is not stagnant global market is stagnant global market is not stagnant 19 / 50 19) If demand of loanable demands increases then borrowing cost of funds is higher zero upside lower 20 / 50 20) Interest rate considering compounding of interest rate and is earned in 12 months is considered as effective annual return ineffective annual return decrease in return increase in return 21 / 50 21) Curve representing demand of funds shifts to left if economic growth in global market is stagnant global market is not stagnant domestic market is stagnant domestic market is not stagnant 22 / 50 22) When price of underlying asset increases then good option is buy call option sell call option buy put option sell put option 23 / 50 23) If demand of loanable demands decrease then borrowing cost of funds is upside lower higher zero 24 / 50 24) Accounts receivable and inventory are examples of short term working capital long term working capital long term fixed assets short term fixed assets 25 / 50 25) If risk of financial security increases and supply curve shifts to left then impact on equilibrium of interest rate must decreases increases positive negative 26 / 50 26) When business companies started investing with funds generated internally is a point which shows that cost of loanable funds is high cost of loanable fund is low equilibrium is zero equilibrium is negative 27 / 50 27) Capital gain is subtracted from return to stockholders to calculate periodic dividend payments constant spot rate payment constant forward rate payment constant future rate payment 28 / 50 28) Theory which states that interest equilibrium is result of demand and supply in trading market is classified as saving fund theory constant funds borrowed theory loanable funds theory 29 / 50 29) Markets in which derivatives are traded are classified as assets backed market cash flow backed markets mortgage backed markets derivative securities markets 30 / 50 30) Consider buying of put option, probability that a buyer would have negative payoff increases with the increase in stock price decrease in stock price increase in maturity duration decrease in maturity duration 31 / 50 31) Value which converts series of equal payments in to value received at end time of investment is classified as present value of annuity future value of annuity decreased value of annuity increased value of annuity 32 / 50 32) Expected rate that originates at any point in future for a specific security is classified as forward rate backward rate termed rate structured rate 33 / 50 33) A swap that is used to evade risk of exchange rate exists because of currency mismatching is classified as floating swaps fixed swaps currency swaps notion swaps 34 / 50 34) When interest rate is higher than equilibrium rate of borrowing loanable funds then financial system has short-term funds long-term funds surplus of funds deficit of funds 35 / 50 35) When interest rate is lower than equilibrium rate of borrowing loanable funds then financial system has surplus of funds deficit of funds short-term funds long-term funds 36 / 50 36) If risk of financial security decreases and supply curve shifts to right and downwards then impact on equilibrium of interest rate must positive negative decreases increases 37 / 50 37) Value which converts series of equal payments in to value received at beginning of investment is classified as decreased value of annuity increased value of annuity present value of annuity future value of annuity 38 / 50 38) Equilibrium interest rate increases and economic conditions decreases then supply curve must shift to down and to left down and to right up and to left up and to right 39 / 50 39) For other non-price conditions, increase in equilibrium interest rate leads to zero restrictiveness negative restriction increase restrictiveness decrease restrictiveness 40 / 50 40) According to demand for funds curve, demand curve shifts down and to left if there is decrease in equilibrium supply equilibrium savings equilibrium demand equilibrium interest rate 41 / 50 41) Type of swaps in which fixed payments of interest are exchanged by two counterparties for floating payments of interest are called float-fixed swaps interest rate swaps indexed swaps counter party swaps 42 / 50 42) Situation in which large portion of majority is borrowed from broker of investor is classified as future investment forward investment leveraged investment non-leveraged investment 43 / 50 43) Type of contract which involves future exchange of assets at a specified price is classified as future contracts present contract spot contract forward contract 44 / 50 44) In interest rate swap transaction, party who pays floating payments of interest is considered as notion buyer notion seller swap buyer swap seller 45 / 50 45) If equilibrium interest rate decreases with respect to decrease in interest rate, then movement along supply of funds curve is upside movement downside movement shift left shift right 46 / 50 46) Liquidity premium theory, unbiased expectations theory and market segmentation theory are theories to describe term structure of segmentation term structure of interest rate term structure of premium term structure of inflation 47 / 50 47) Interest rate which is not reinvested but is earned is classified as invested interest simple interest earned interest unstated interest 48 / 50 48) Plant and equipment are examples of long term fixed assets short term fixed assets short term working capital long term working capital 49 / 50 49) Formula of effective annual return is written as (1+r) c – 1 (2+r) c – 2 (3+r) c – 3 (1+r) c – 5 50 / 50 50) According to loanable funds theory, fall in interest rates results in to zero demand of funds equilibrium demands of funds higher demand of funds lower demand of 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