FIN 370 Final (Chap 5,6,7,8,10,11,12)
Exam Questions and Answers Graded A+
C5.1) ________ are NOT one of the three categories reported for foreign
exchange.
A) Spot transactions
B) Swap transactions
C) Strip transactions
D) Futures transactions - Correct answer-C) Strip transactions
C5.2) A ________ transaction in the foreign exchange market requires an almost
immediate delivery (typically within two days) of foreign exchange.
A) spot
B) forward
C) futures
D) none of the above - Correct answer-A) spot
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,C5.3) A ________ transaction in the foreign exchange market requires delivery of
foreign exchange at some future date.
A) spot
B) forward
C) swap
D) currency - Correct answer-B) forward
C5.4) A forward contract to deliver British pounds for U.S. dollars could be
described either as ________ or ________.
A) buying dollars forward; buying pounds forward
B) selling pounds forward; selling dollars forward
C) selling pounds forward; buying dollars forward
D) selling dollars forward; buying pounds forward - Correct answer-C) selling
pounds forward; buying dollars forward
C5.5) A common type of swap transaction in the foreign exchange market is the
________ where the dealer buys the currency in the spot market and sells the same
amount back to the same bank in the forward market.
A) "forward against spot"
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,B) "forspot"
C) "repurchase agreement"
D) "spot against forward" - Correct answer-D) "spot against forward"
C5. 6) The ________ is a derivative forward contract that was created in the 1990s.
It has the same characteristics and documentation requirements as traditional
forward contracts except that they are only settled in U.S. dollars and the foreign
currency involved in the transaction is not delivered.
A) nondeliverable forward
B) dollar only forward
C) virtual forward
D) internet forward - Correct answer-A) nondeliverable forward
C5. 7) Which of the following is NOT true regarding nondeliverable forward
(NDF) contracts?
A) NDFs are used primarily for emerging market currencies.
B) Pricing of NDFs reflects basic interest rate differentials plus an additional
premium charged for dollar settlement.
C) NDFs can only be traded by central banks.
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, D) All of the above are true. - Correct answer-C) NDFs can only be traded by
central banks.
Incorrect because NDFs are traded & settled outside the country of subject
currency (beyond government control)
C5. A ________ transaction in the interbank market is the simultaneous purchase
and sale of a given amount of foreign exchange for two different value dates.
A) spot
B) forward-forward
C) swap
D) futures - Correct answer-C) swap
C5. (T/F) A spot transaction in the interbank market for foreign exchange would
typically involve a two-day delay in the actual delivery of the currencies, while
such a transaction between a bank and its commercial customer would not
necessarily involve a two-day wait. - Correct answer-TRUE
C5. 10) (T/F) Nondeliverable Forwards were originally envisioned as a method of
currency speculation, but it is now estimated that 70% of NDFs are trading for
hedging purposes. - Correct answer-FAlSE. Although originally envisioned to be a
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Exam Questions and Answers Graded A+
C5.1) ________ are NOT one of the three categories reported for foreign
exchange.
A) Spot transactions
B) Swap transactions
C) Strip transactions
D) Futures transactions - Correct answer-C) Strip transactions
C5.2) A ________ transaction in the foreign exchange market requires an almost
immediate delivery (typically within two days) of foreign exchange.
A) spot
B) forward
C) futures
D) none of the above - Correct answer-A) spot
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,C5.3) A ________ transaction in the foreign exchange market requires delivery of
foreign exchange at some future date.
A) spot
B) forward
C) swap
D) currency - Correct answer-B) forward
C5.4) A forward contract to deliver British pounds for U.S. dollars could be
described either as ________ or ________.
A) buying dollars forward; buying pounds forward
B) selling pounds forward; selling dollars forward
C) selling pounds forward; buying dollars forward
D) selling dollars forward; buying pounds forward - Correct answer-C) selling
pounds forward; buying dollars forward
C5.5) A common type of swap transaction in the foreign exchange market is the
________ where the dealer buys the currency in the spot market and sells the same
amount back to the same bank in the forward market.
A) "forward against spot"
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,B) "forspot"
C) "repurchase agreement"
D) "spot against forward" - Correct answer-D) "spot against forward"
C5. 6) The ________ is a derivative forward contract that was created in the 1990s.
It has the same characteristics and documentation requirements as traditional
forward contracts except that they are only settled in U.S. dollars and the foreign
currency involved in the transaction is not delivered.
A) nondeliverable forward
B) dollar only forward
C) virtual forward
D) internet forward - Correct answer-A) nondeliverable forward
C5. 7) Which of the following is NOT true regarding nondeliverable forward
(NDF) contracts?
A) NDFs are used primarily for emerging market currencies.
B) Pricing of NDFs reflects basic interest rate differentials plus an additional
premium charged for dollar settlement.
C) NDFs can only be traded by central banks.
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, D) All of the above are true. - Correct answer-C) NDFs can only be traded by
central banks.
Incorrect because NDFs are traded & settled outside the country of subject
currency (beyond government control)
C5. A ________ transaction in the interbank market is the simultaneous purchase
and sale of a given amount of foreign exchange for two different value dates.
A) spot
B) forward-forward
C) swap
D) futures - Correct answer-C) swap
C5. (T/F) A spot transaction in the interbank market for foreign exchange would
typically involve a two-day delay in the actual delivery of the currencies, while
such a transaction between a bank and its commercial customer would not
necessarily involve a two-day wait. - Correct answer-TRUE
C5. 10) (T/F) Nondeliverable Forwards were originally envisioned as a method of
currency speculation, but it is now estimated that 70% of NDFs are trading for
hedging purposes. - Correct answer-FAlSE. Although originally envisioned to be a
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