WGU D447 PRACTICE QUESTIONS (64) WITH
CORRECT ANSWERS A+ GRADED/ 2024-2025
UPDATE
a three-month rollover basis from Barclays in
London. Three month LIBOR is currently 5.5
percent, but ABC is worried about an increase in
three-month LIBOR 3 months from now. What
could they do to hedge?
A) Buy a 3 × 6 FRA in the amount of $4 million.
B) Sell a 3 × 6 FRA in the amount of $4 million.
C) Buy a 3 × 3 FRA in the amount of $4 million.
,D) Buy a 3 × 9 FRA in the amount of $4 million. - --
ANSWER---A
Bank A entered into a long "3 against 6" forward
rate agreement on a notional amount of
$10,000,000 at an agreement rate of 3 percent.
Suppose at the settlement date of the FRA, the
settlement rate is 3.5 percent. What is the cash
settlement of the FRA, assuming 90 days in FRA
perdiod?
A) Net payment of $12,391.57 to Bank A
B) Net payment of $12,500 to Bank A
C) Net payment of $50,000 from Bank A to the
counterparty
D) Net payment of $48,309.18 from Bank A to the
counterparty - --ANSWER---A
[$10,000,000 × (0.035 − 0.03)× (90/360)] / [1 +
(0.035 × 90/360)] = $12,391.57
,Consider the position of a treasurer of a MNC, who
will receive $20,000,000 that his firm will not need
for the next 90 days. To hedge against an interest
rate decline
A) He could borrow the $20,000,000 in the money
market.
B) He could take a long position in Eurodollar
futures contracts.
C) He could take a short position in Eurodollar
futures contracts.
D) none of the options - --ANSWER---B
A decrease in the implied three-month LIBOR yield
causes Eurodollar futures price
A) to increase.
B) to decrease.
C) there is no direct or indirect relationship.
D) none of the options - --ANSWER---A
, Domestic bonds account for the largest share of
outstanding bonds, equaling approximately what
percent of the total?
A) 78 percent
B) 45 percent
C) 25 percent\
D) 15 percent - --ANSWER---A
A "foreign bond" issue is __________
A) one denominated in a particular currency but
sold to investors in national capital markets other
than the country that issued the denominating
currency.
CORRECT ANSWERS A+ GRADED/ 2024-2025
UPDATE
a three-month rollover basis from Barclays in
London. Three month LIBOR is currently 5.5
percent, but ABC is worried about an increase in
three-month LIBOR 3 months from now. What
could they do to hedge?
A) Buy a 3 × 6 FRA in the amount of $4 million.
B) Sell a 3 × 6 FRA in the amount of $4 million.
C) Buy a 3 × 3 FRA in the amount of $4 million.
,D) Buy a 3 × 9 FRA in the amount of $4 million. - --
ANSWER---A
Bank A entered into a long "3 against 6" forward
rate agreement on a notional amount of
$10,000,000 at an agreement rate of 3 percent.
Suppose at the settlement date of the FRA, the
settlement rate is 3.5 percent. What is the cash
settlement of the FRA, assuming 90 days in FRA
perdiod?
A) Net payment of $12,391.57 to Bank A
B) Net payment of $12,500 to Bank A
C) Net payment of $50,000 from Bank A to the
counterparty
D) Net payment of $48,309.18 from Bank A to the
counterparty - --ANSWER---A
[$10,000,000 × (0.035 − 0.03)× (90/360)] / [1 +
(0.035 × 90/360)] = $12,391.57
,Consider the position of a treasurer of a MNC, who
will receive $20,000,000 that his firm will not need
for the next 90 days. To hedge against an interest
rate decline
A) He could borrow the $20,000,000 in the money
market.
B) He could take a long position in Eurodollar
futures contracts.
C) He could take a short position in Eurodollar
futures contracts.
D) none of the options - --ANSWER---B
A decrease in the implied three-month LIBOR yield
causes Eurodollar futures price
A) to increase.
B) to decrease.
C) there is no direct or indirect relationship.
D) none of the options - --ANSWER---A
, Domestic bonds account for the largest share of
outstanding bonds, equaling approximately what
percent of the total?
A) 78 percent
B) 45 percent
C) 25 percent\
D) 15 percent - --ANSWER---A
A "foreign bond" issue is __________
A) one denominated in a particular currency but
sold to investors in national capital markets other
than the country that issued the denominating
currency.
