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Total 345 Questions | Updated On: Nov 21, 2024

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Question 1

What does correlation between two variables measure?

A : Symmetry of a joint distribution of the two variables.

B : Association between the two variables and the strength of a possible statisticalrelationship.

C : The proportion of variability in one of the variables that is explained by the other.

D : Extreme returns of both variables.

Answer: B

Question 2

A bank customer expecting to pay its Brazilian supplier BRL 100 million asks Alpha Bank to

buy Australian dollars and sell Brazilian reals. Alpha bank does not hold reals so it asks for

a quote to buy Brazilian reals in the market. The market rate is 100. The bank quotes a

selling rate of 101 to its customer and sells the reals at this quoted price. Then the bank

immediately buys the real at the market rate and completes foreign exchange matched

transaction. What is the financial impact of this transaction for Alpha bank?

A : This transaction leaves the bank a profit of AUD 10,101.

B : This transaction leaves the bank a profit of BRL 10,101.

C : This transaction leaves the bank a loss of AUD 10,101.

D : This transaction leaves the bank a loss of BRL 10,101.

Answer: A

Question 3

What is a difference between currency swaps and interest rate swaps?

A : Currency swaps do not require the exchange of notional principal on maturity.

B : Currency swaps allow banks and customers to obtain the risk/reward profile of long-terminterest rates without having to use long-term funding.

C : Currency swaps are OTC derivative contracts.

D : Currency swaps generate foreign exchange rate risk in addition to interest rate risk.

Answer: D

Question 4

Which one of the following four statements about preferred shares is INCORRECT?

A : Preferred shares refer to a class of securities that is a cross between equity and debt.

B : Preferred shares represent residual of a corporation after its other liabilities have beenpaid.

C : Preferred shares are subordinated to debt.

D : Preferred shares can be perpetual or have maturities far exceeding debt maturities.

Answer: B

Question 5

Which one of the following four statements about market risk is correct? Market risk is

A : The exposure to an adverse change in the credit quality in portfolios or of financialinstruments.

B : The maximum likely loss in the market value of portfolios and financial instruments overa given period of time.

C : The maximum likely loss in the market value of portfolios and financial instrumentscaused by the failure of the counterparty to meet its obligations.

D : The exposure to an adverse change in the market value of portfolios and financialinstruments caused by a change in market prices or rates.

Answer: D

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Total 345 Questions | Updated On: Nov 21, 2024

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