Fin 321 Final Exam 2026 Exam Questions LATEST
VERSIONS 185 QUESTIONS AND CORRECT
VERIFIED ANSWERS WITH RATIONALES (100%
CORRECT) A+ GRADED ASSURED
=> If a country imports more than they export to a foreign country:
The value of that country's currency will tend to ______(relative to value of foreign currency),
all else equal. - CORRECT ANSWER: fall
A bank issued $200 million worth of one-year Brazilian CDs (as liabilities) in Brazilian reals at a
rate of 6.5%.
Assuming no hedge, with the Brazilian CDs above, this bank is exposed to the risk of the
Brazilian real appreciating against the US dollar. (T/F) - CORRECT ANSWER: True
A bank issued $200 million worth of one-year Brazilian CDs (as liabilities) in Brazilian reals at a
rate of 6.5%. (Note: 6.5% is the rate based on Brazilian reals)
The original spot exchange rate at the beginning of the year was $0.305/Br.
What is the cost rate of the Brazilian CDs (to the bank) based on US dollar terms if the exchange
rate at the end of the year is $0.325/Br? - CORRECT ANSWER: 13.48%
A financial institution's overall net foreign (FX) exposure in any given currency i is measured as
- CORRECT ANSWER: Net exposurei = (FX assetsi - FX liabilitiesi) + (FX boughti - FX soldi)
= Net foreign assetsi + Net FX boughti
= Net positioniwherei
= ith country's currency
Accrued interest - CORRECT ANSWER: must be paid by the buyer of a bond to the seller of a
bond if the bond is purchased between interest payment dates.
,-it is the portion of the coupon payment accrued between the last coupon payment and the
settlement day
Accrued interest is the portion of the coupon payment accrued between the settlement date and
the next coupon payment date. (T/F) - CORRECT ANSWER: False
Accrued interest must be paid by the __________ of a bond to the __________ of a bond if the
bond is purchased on _______________. - CORRECT ANSWER: buyer; seller; a date in
between coupon payment dates
All else constant, a U.S. financial institution with a ___________ net exposure in any given
foreign currency is not exposed to fluctuations in the exchange rate of that currency against the
US dollar. - CORRECT ANSWER: Zero
All else constant, due to their longer maturity, T-notes and T-bonds have lower interest rate risks
than money market securities. (T/F) - CORRECT ANSWER: False
All else equal, if Japan's inflation is higher than the U.S.'s inflation, demand for goods will shift
to ____________, pushing the demand for the _________ up. As a result, the yen will tend to
_________ relative to the US dollar. - CORRECT ANSWER: The U.S; U.S dollars; depreciate
All expansionary monetary policies increase the money supply. (T/F) - CORRECT ANSWER:
True
An option with zero intrinsic value cannot have a positive premium. (T/F) - CORRECT
ANSWER: False
An option's Time Value= - CORRECT ANSWER: Option premium - Intrinsic Value
An out-of-money option has a negative intrinsic value. (T/F) - CORRECT ANSWER: False
, Annual federal deficit - CORRECT ANSWER: equal to annual expenditures (G) less taxes (T)
received
Balance Sheet of the Federal Reserve - CORRECT ANSWER: Major liabilities:
Reserve depositsCurrency in circulation
Major assets:
Treasury securitiesU.S. government agency securities
Best efforts underwriting: - CORRECT ANSWER: The investment bank (IB) acts only as an
agent and agree to use their 'best efforts' to sell the issue to the public.
-usually underwriter only receives a flat fee and doesn't bear risk of unsold inventory
-it's possible to have commission per share but it's rare
-regulation and competition with other IB's is motivation enough for IB to put in best efforts
bond indenture - CORRECT ANSWER: the legal contract that specifies the rights and
obligations of the bond issuer and the bond holders.
Bond Market Participants - CORRECT ANSWER: The major issuers of debt market securities
are federal, state and local governments, as well as corporations.
The major purchasers of capital market securities are households, businesses, government units,
and foreign investors.
Bond ratings - CORRECT ANSWER: The three major bond rating agencies are
Moody's,Standard & Poor's (S&P), andFitch Ratings
Bonds are rated by perceived default risk
Bonds may be either investment or speculative (i.e., junk) grade
VERSIONS 185 QUESTIONS AND CORRECT
VERIFIED ANSWERS WITH RATIONALES (100%
CORRECT) A+ GRADED ASSURED
=> If a country imports more than they export to a foreign country:
The value of that country's currency will tend to ______(relative to value of foreign currency),
all else equal. - CORRECT ANSWER: fall
A bank issued $200 million worth of one-year Brazilian CDs (as liabilities) in Brazilian reals at a
rate of 6.5%.
Assuming no hedge, with the Brazilian CDs above, this bank is exposed to the risk of the
Brazilian real appreciating against the US dollar. (T/F) - CORRECT ANSWER: True
A bank issued $200 million worth of one-year Brazilian CDs (as liabilities) in Brazilian reals at a
rate of 6.5%. (Note: 6.5% is the rate based on Brazilian reals)
The original spot exchange rate at the beginning of the year was $0.305/Br.
What is the cost rate of the Brazilian CDs (to the bank) based on US dollar terms if the exchange
rate at the end of the year is $0.325/Br? - CORRECT ANSWER: 13.48%
A financial institution's overall net foreign (FX) exposure in any given currency i is measured as
- CORRECT ANSWER: Net exposurei = (FX assetsi - FX liabilitiesi) + (FX boughti - FX soldi)
= Net foreign assetsi + Net FX boughti
= Net positioniwherei
= ith country's currency
Accrued interest - CORRECT ANSWER: must be paid by the buyer of a bond to the seller of a
bond if the bond is purchased between interest payment dates.
,-it is the portion of the coupon payment accrued between the last coupon payment and the
settlement day
Accrued interest is the portion of the coupon payment accrued between the settlement date and
the next coupon payment date. (T/F) - CORRECT ANSWER: False
Accrued interest must be paid by the __________ of a bond to the __________ of a bond if the
bond is purchased on _______________. - CORRECT ANSWER: buyer; seller; a date in
between coupon payment dates
All else constant, a U.S. financial institution with a ___________ net exposure in any given
foreign currency is not exposed to fluctuations in the exchange rate of that currency against the
US dollar. - CORRECT ANSWER: Zero
All else constant, due to their longer maturity, T-notes and T-bonds have lower interest rate risks
than money market securities. (T/F) - CORRECT ANSWER: False
All else equal, if Japan's inflation is higher than the U.S.'s inflation, demand for goods will shift
to ____________, pushing the demand for the _________ up. As a result, the yen will tend to
_________ relative to the US dollar. - CORRECT ANSWER: The U.S; U.S dollars; depreciate
All expansionary monetary policies increase the money supply. (T/F) - CORRECT ANSWER:
True
An option with zero intrinsic value cannot have a positive premium. (T/F) - CORRECT
ANSWER: False
An option's Time Value= - CORRECT ANSWER: Option premium - Intrinsic Value
An out-of-money option has a negative intrinsic value. (T/F) - CORRECT ANSWER: False
, Annual federal deficit - CORRECT ANSWER: equal to annual expenditures (G) less taxes (T)
received
Balance Sheet of the Federal Reserve - CORRECT ANSWER: Major liabilities:
Reserve depositsCurrency in circulation
Major assets:
Treasury securitiesU.S. government agency securities
Best efforts underwriting: - CORRECT ANSWER: The investment bank (IB) acts only as an
agent and agree to use their 'best efforts' to sell the issue to the public.
-usually underwriter only receives a flat fee and doesn't bear risk of unsold inventory
-it's possible to have commission per share but it's rare
-regulation and competition with other IB's is motivation enough for IB to put in best efforts
bond indenture - CORRECT ANSWER: the legal contract that specifies the rights and
obligations of the bond issuer and the bond holders.
Bond Market Participants - CORRECT ANSWER: The major issuers of debt market securities
are federal, state and local governments, as well as corporations.
The major purchasers of capital market securities are households, businesses, government units,
and foreign investors.
Bond ratings - CORRECT ANSWER: The three major bond rating agencies are
Moody's,Standard & Poor's (S&P), andFitch Ratings
Bonds are rated by perceived default risk
Bonds may be either investment or speculative (i.e., junk) grade
