Test Bank For International Accounting 5th Edition Timothy Doupnik Mark Finn Giorgio Gotti Hector Perera

Test Bank for International Accounting, 5th Edition, Timothy Doupnik, Mark Finn, Giorgio Got
Test Bank for International Accounting, 5th Edition,

Timothy Doupnik, Mark Finn, Giorgio Gotti Hector
Perera
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International Accounting, 5e (Doupnik)
Chapter 6 Foreign Currency Transactions and Hedging Foreign Exchange Risk
1) According to the World Trade Organization, what was the size of international trade in 2016?
A) $7,000,000,000 (7 billion dollars)
B) $70,000,000,000 (70 billion dollars)
C) $37,000,000,000 (37 billion dollars)
D) $12,000,000,000,000 (12 trillion dollars)
Answer: D
Difficulty: 1 Easy
Topic: Foreign Currency Transactions
Learning Objective: 06-01 Provide an overview of the foreign exchange market.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
2) In the years between 1990 and 2001 when global gross domestic product rose 27%, what was
the growth in global exports?
A) 25%
B) 75%
C) 35%
D) 50%
Answer: B
Difficulty: 2 Medium
Bloom's: Remember
3) What is a "foreign exchange rate?"

A) The price to buy a foreign currency
B) The price to buy foreign goods
C) The difference between the price of goods in a foreign currency and the price in a domestic
currency
D) The cost to hold all monetary assets in a single currency
Answer: A
Difficulty: 1 Easy
Topic: Foreign Exchange Rates
Bloom's: Understand
AACSB: Knowledge Application
1
Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
4) Which of the following statements is true about the Euro?
A) It is the currency used by all countries in the European Union.
B) It is pegged to the U.S. dollar.
C) It is the currency required to be used in financial reporting under international accounting
standards.
D) None of the statements above is true.
Answer: D
Bloom's: Apply
5) A bank exchanging foreign currency makes its profit in what manner?

A) On the difference between the spot rate and the foreign rate
B) A bank is forbidden, by law, to charge a premium in foreign currency exchange
C) On the present value of the forward rate discounted to the date an option is purchased
D) On the difference between the buying and selling rates
Answer: D
Topic: Exchange Rate mechanisms
Bloom's: Apply
6) King's Bank, a British company, purchases market research services from Harris Interactive, a
U.S. company. As per the terms of the contract, payment is to be made three months later in U.S.
dollars when the report is delivered. How would King's Bank like to see the exchange rate move,
assuming it isn't hedging the transaction?
A) It hopes that the U.S. dollar appreciates in value against the British pound.
B) It hopes that the British pound appreciates in value against the U.S. dollar.
C) It makes no difference, since they are the customer and the sale takes place in the U.K.
D) It hopes that there is no change between the spot rate and the forward rate.
Answer: B
Learning Objective: 06-02 Explain how fluctuations in exchange rates give rise to foreign
exchange risk.
Bloom's: Apply
2
7) Why was there very little fluctuation in the foreign exchange rate in the period 1945-1973?
A) This was a period when the world economy was very stable.
B) There was very little growth in the world economy between 1945 and 1973.
C) Countries linked their currency to the U.S. dollar, which was backed by gold reserves.
D) Most currencies were pegged to the British pound, which could be converted to sterling
silver.
Answer: C
Difficulty: 1 Easy
exchange risk.
Bloom's: Apply
8) The central bank of Country X buys and sells its own currency to ensure that the currency is
always exchanged in a ratio of 2:1 with the currency of Country Y. What can we conclude about
these two currencies?
A) Country X is using the Euro.
B) Country X has pegged its currency to the currency of Country Y.
C) Country X has an undesirable currency.
D) Country X allows its currency to float relative to the currency of Country Y.
Answer: B
Bloom's: Apply
3
9) When a currency is allowed to increase or decrease freely according to market forces, the
currency is said to:
A) be pegged to another currency.
B) be less valuable.
C) have independent float.
D) devalue.
Answer: C
Difficulty: 1 Easy
Topic: Exchange Rate mechanisms
exchange risk.
Bloom's: Understand
10) For an upcoming trip, Pat wants to buy Euros at the local bank when the current exchange
rate quoted on OANDA.com was $1.563 per €1. What should Pat plan to pay for €1,000?
A) exactly $1,563
B) more than $1,563
C) about $640
D) less than $640
Answer: B
exchange risk.
Bloom's: Understand
11) The number of Japanese yen (¥) required today to buy one U.S. dollar ($) today is called:
A) the spot rate.
B) the exact rate.
C) the forward rate.
D) the retail rate.
Answer: A
Difficulty: 1 Easy
Topic: Spot and Forward Rates
exchange risk.
Bloom's: Apply
4
12) The number of U.S. dollars ($) today to buy one U.K. pound (£) six months from now is
called:
A) the spot rate.
B) the exact rate.
C) the forward rate.
D) the prime rate.
Answer: C
Difficulty: 1 Easy
Topic: Spot and Forward Rates
exchange risk.
Bloom's: Apply
13) What is foreign exchange risk exposure?

A) The possibility of a loss because of changes in the value of a foreign currency
B) Losses caused by paying for purchased goods in a foreign currency
C) Losses caused by receiving payment in a foreign currency for goods sold
D) All of the above
Answer: A
exchange risk.
Bloom's: Evaluate
AACSB: Reflective Thinking
5
14) What is "asset exposure" to foreign exchange risk?
A) The possibility that an asset denominated in domestic currency will decline in value because
of changes in the foreign exchange rate
B) The possibility that an asset denominated in a foreign currency will change in value because
of a change in the foreign exchange rate
C) The loss resulting from an import purchase when a foreign currency appreciates
D) The loss resulting from an import purchase when a foreign currency depreciates
Answer: B
Difficulty: 3 Hard
exchange risk.
Bloom's: Evaluate
15) What is a foreign currency transaction?

A) It is another name for an international transaction.
B) It is a transaction that involves payment at a date sometime in the future.
C) It is a business deal denominated in a currency other than a company's domestic currency.
D) It is an economic event measured in a currency other than U.S. dollars.
Answer: C
Difficulty: 1 Easy
exchange risk.
Bloom's: Remember
16) Under U.S. GAAP, what method is required to account for foreign currency transactions?
A) A one-transaction perspective must be used.
B) The two-transaction perspective must be used.
C) A sale is not recorded until payment is received and converted to U.S. dollars.
D) A sale is not recorded until payment is received in the foreign currency.
Answer: B
Difficulty: 1 Easy
Topic: Accounting Alternatives
Learning Objective: 06-03 Demonstrate the accounting for foreign currency transactions.
Bloom's: Understand
6
17) Under International Accounting Standards Board rules, what method is required to account
for foreign currency transactions?
A) A one-transaction perspective must be used.
B) The two-transaction perspective must be used.
C) A sale is not recorded until payment is received and converted to U.S. dollars.
D) A sale is not recorded until payment is received in the foreign currency.
Answer: B
Difficulty: 1 Easy
Bloom's: Understand
18) Why must the two-transaction perspective be used for recording foreign currency
transactions under U.S. GAAP?
A) The two-transaction perspective is required under IFRS.
B) U.S. GAAP requires conservatism in financial reporting.
C) All other methods are excessively complicated to use and therefore obscure the essence of the
transaction.
D) Management made two decisions: one to sell and another to extend credit in a foreign
currency.
Answer: D
Difficulty: 1 Easy
Bloom's: Apply
19) Under U.S. GAAP, foreign exchange losses should be recorded by:
A) debiting "Foreign Exchange Loss".
B) crediting "Foreign Exchange Loss".
C) debiting "Retained Earnings".
D) debiting "Sales Revenue".
Answer: A
Difficulty: 1 Easy
Bloom's: Apply
7
20) Under U.S. GAAP, what is the proper treatment of unrealized foreign exchange losses?
A) They should be deferred on the Balance Sheet until the cash is paid.
B) They should not be recognized until cash is received to complete the transaction.
C) They should be recorded on the Income Statement in the period the exchange rate changes.
D) They should be deferred on the Balance Sheet until an offsetting foreign exchange gain is
realized.
Answer: C
Bloom's: Apply
21) Under U.S. GAAP, what is the proper treatment of unrealized foreign exchange gains?
A) They should be deferred on the Balance Sheet until cash is received.
B) The principle of conservatism requires that they should never be recognized.
C) They should not be recorded until cash is received and the exchange transaction is completed.
D) They should be recognized in income on the date the exchange rate changes.
Answer: D
Bloom's: Apply
22) Why is the accrual method of accounting for unrealized foreign exchange gains sometimes
criticized?
A) Foreign exchange gains almost never occur, so there is no reason to have an accounting
standard for it.
B) It violates the principle of conservatism.
C) It is not objective.
D) There is no reliable method for measuring unrealized foreign exchange gains.
Answer: B
Difficulty: 1 Easy
Bloom's: Apply
8
23) How should U.S. companies record receivables and payables from international trade that are
denominated in foreign currencies?
A) All assets and liabilities of U.S. companies must be recorded in foreign currency.
B) Conservatism would dictate that liabilities should be recorded in the currency in which they
are payable, but assets should be recorded in U.S. dollars, regardless of what currency will be
received.
C) There should be separate receivable and payable accounts for each currency that is used by
the company.
D) The company should choose any one currency to use for recording receivable and payables so
that there is consistency in the accounts.
Answer: C
Bloom's: Apply
24) Northland Corporation recorded £1,000,000 in Accounts Receivable for sales to customers in
the United Kingdom and recorded Accounts Payable of 2,000,000 Yuan for product purchased
from China. If Northland recorded a foreign currency exchange loss on its receivables and a
foreign currency gain on its payables, what must have happened to each currency?
A) Yuan appreciated, Pound depreciated
B) Yuan depreciated, Pound appreciated
C) Yuan appreciated, Pound appreciated
D) Yuan depreciated, Pound depreciated
Answer: D
Difficulty: 3 Hard
Bloom's: Evaluate
9
25) A noncancelable sales order that specifies foreign currency price and date of delivery is
known as a:
A) hedge.
B) foreign currency firm commitment.
C) forward contract.
D) put option.
Answer: B
Difficulty: 1 Easy
Bloom's: Remember
26) Amazing Corporation, a U.S. enterprise, sold product to a customer in Wales on October 1,
20x1 for £100,000 with payment required on April 1, 20x2. Relevant exchange rates are:
Spot rate Forward rate (to 4/1/x2)

October 1, 20x1 $1.87 $1.85
December 31, 20x1 1.85 $1.84
April 1, 20x2 1.90
The discount factor corresponding to the company's incremental borrowing rate for 6 months is
0.95.
Assuming that Amazing Corporation does not hedge this transaction, what is the amount of
exchange gain or loss that it should show on its December 31, 2001 income statement?
A) Loss $1,000
B) Loss $2,000
C) Gain $1,000
D) Gain $1,900
Answer: B
Bloom's: Apply
10

October 1, 20x1 $1.87 $1.85
December 31, 20x1 1.85 $1.84
April 1, 20x2 1.90
0.95.
Assume that Amazing Corporation enters a forward contract on October 1, 2001 to sell £100,000
six months hence, on April 1, 2002. How should Amazing Corporation report the forward
contract on its December 31, 2001 financial statements?
A) Asset $1,950
B) Liability $1,950
C) Asset $1,000
D) Asset $950
Answer: D
Difficulty: 3 Hard
Topic: Hedging Foreign Exchange Risk
Bloom's: Apply
11

October 1, 20x1 $1.87 $1.85
December 31, 20x1 1.85 $1.84
April 1, 20x2 1.90
0.95.
What term is used to describe the circumstances under which Amazing Corporation is entering
the forward contract?
A) Hedge of an unrecognized foreign currency firm commitment
B) Hedge of a recognized foreign-currency-denominated asset
C) Hedge of a forecast foreign-currency-denominated transaction
D) Hedge of net investment in foreign operations
Answer: B
Bloom's: Apply
12
29) On November 1, 2001 Zamfir Company, a U.S. corporation, purchased minerals from a
Russian company for 2,000,000 rubles, payable in 3 months. The relevant exchange rates
between the U.S. and Russian currencies are given:
Spot rate Forward rate (at February 1, 20x2)

November 1, 20x1 $0.348 $0.348
December 31, 20x1 0.359 $0.352
February 1, 20x2 0.344
The company's incremental borrowing rate provides a discount rate of 0.975 for three months.
If Zamfir does not attempt to hedge this transaction, what is the gain or loss that should be shown
on the company's December 31, 2001 financial statements?
A) $22,000 loss
B) $21,450 loss
C) $8,000 gain
D) $7,800 gain
Answer: A
Bloom's: Apply
13
30) On November 1, 2001 Zamfir Company, a U.S. corporation, purchased minerals from a
Russian company for 2,000,000 rubles, payable in 3 months. The relevant exchange rates
between the U.S. and Russian currencies are given:
Spot rate Forward rate (at February 1, 20x2)

November 1, 20x1 $0.348 $0.348
December 31, 20x1 0.359 $0.352
February 1, 20x2 0.344
The company's incremental borrowing rate provides a discount rate of 0.975 for three months.
Assume that on November 1, 2001 Zamfir Company enters a forward contract to buy 2,000,000
rubles on February 1, 2002. What is the fair value of the forward contract on December 31,
2001?
A) $8,000
B) $7,800
C) $22,000
D) $8,200
Answer: B
Difficulty: 3 Hard
Bloom's: Apply
14
31) On December 1, 2001 Pimlico made sales to a customer in India and recorded Accounts
Receivable of 10,000,000 rupees. The customer has until March 1, 2002 to pay. On December 1,
2001, Pimlico paid $500 for a put option to sell rupees at a strike price of $2.30 per 100 rupees
on March 1, 2002, which was the spot rate on December 1, 2001. On December 31, 2001, the
spot rate was $2.80 per 100 rupees and the option premium was $0.004 per 100 rupees.
What is the fair value of the option on December 1, 2001?

A) $0
B) $500
C) $400
D) $10,000
Answer: B
Bloom's: Apply
What is the fair value of the option on December 31, 2001?

A) $0
B) $500
C) $400
D) $10,000
Answer: C
Difficulty: 3 Hard
Bloom's: Apply
15
What is the foreign currency exchange gain or loss on December 31, 2001?
A) $50,000 loss
B) $50,000 gain
C) $10,000 gain
D) $10,000 loss
Answer: B
Bloom's: Apply
If the spot rate on March 1, 2002 was $2.45 per 100 rupees, what is the foreign currency
exchange gain or loss that should be recorded that day?
A) $15,000 gain
B) $15,000 loss
C) $35,000 gain
D) $35,000 loss
Answer: D
Bloom's: Apply
16
35) When two parties from different countries enter into a transaction:
A) the currency to be used for settling the transaction is set by the government.
B) a third country's currency must be used to denominate the transaction.
C) the two parties are free to decide the currency that should be used to settle the transaction.
D) the domestic currency of the buyer must be used to settle the transaction.
Answer: C
Difficulty: 1 Easy
Learning Objective: 06-04 Describe how foreign currency forward contracts and foreign
currency options can be used to hedge foreign exchange risk.
Bloom's: Remember
36) What has occurred when one company arranges to buy a foreign currency sometime in the
future, at an exchange rate quoted today?
A) The company has purchased a foreign currency option.
B) The company has entered a forward contract.
C) The currency has been devalued.
D) None of the above
Answer: B
Difficulty: 1 Easy
Bloom's: Apply
37) What has occurred when one company purchases the right to buy a foreign currency
sometime in the future at an exchange rate quoted today?
A) The company has acquired a call option.
B) The company has entered a forward contract.
C) The currency has appreciated relative to the dollar.
D) The company has acquired a put option.
Answer: A
Bloom's: Apply
17
38) What is a "strike price?"
A) The exchange rate that is used to buy a foreign currency today
B) The price that will be paid for goods in a forward contract
C) The exchange rate that will be used if a foreign currency option is executed
D) The difference between the wholesale rate and the retail rate for foreign currency exchange
Answer: C
Difficulty: 1 Easy
Bloom's: Apply
39) What term is used for an option with a positive intrinsic value?
A) Put option
B) Over the counter
C) In the money
D) Call option
Answer: C
Difficulty: 1 Easy
Bloom's: Apply
40) What is the intrinsic value of a foreign currency option?

A) The difference between the spot rate and the strike price
B) The gain that could be realized if the option was exercised immediately
C) The chance that a currency will rise over time to make the option in the money
D) The difference between a call option and a put option
Answer: B
Bloom's: Evaluate
18
41) On 1 January, 2015, Hikers Inc., a U.S.-based company, borrowed £200,000 on a two-year
note at a per annum interest of 4.5%. The spot rate on this day was $1.65 per pound. The spot
rate on 31 December, 2015, was $1.64 per pound. The journal entries to account for this foreign
currency borrowing will include:
A) a debit to Cash for $200,000 on January 1, 2015.
B) a credit to Notes Payable for $330,000 on December 31, 2015.
C) a debit to Foreign Exchange Loss for $90 on December 31, 2015.
D) a debit to Interest Expense for $14,760 on December 31, 2015.
Answer: D
Topic: Accounting for Derivatives
Bloom's: Evaluate
42) What is the primary difference between a cash flow hedge and a fair value hedge?
A) The fair value hedge must completely offset the variability in the cash flow from the foreign
currency receivable or payable.
B) The cash flow hedge can only be used to offset potential foreign currency losses on accounts
receivable.
C) The cash flow hedge must completely offset the variability in cash flow from the foreign
currency receivable or payable.
D) The fair value hedge can only be used to offset the variability in cash flow from long-term
fixed assets related to foreign currency fluctuations.
Answer: C
Topic: Accounting for Derivatives
Learning Objective: 06-05 Describe the concepts of cash flow hedges, fair value hedges, and
hedge accounting.
Bloom's: Evaluate
19
43) Which of the following statements is true about hedge accounting under U.S. GAAP?
A) Companies may choose whether to account for derivatives as cash flow hedges or fair value
hedges.
B) If a derivative qualifies as a cash flow hedge, the hedging instrument is adjusted to fair value
on each balance sheet date.
C) If a derivative is elected by the company not to be designated as a cash flow hedge, it must be
accounted for as such.
D) Hedge accounting is only advantageous when a foreign currency depreciates between the
transaction date and the payment date.
Answer: B
Topic: Hedge Accounting
hedge accounting.
Bloom's: Evaluate
44) Under U.S. GAAP, which of the following conditions must be met to qualify for hedge
accounting?
A) There must be formal documentation of the hedging relationship.
B) A derivative must be used specifically to hedge fair value exposure or cash flow exposure.
C) The hedge must be effective.
D) All of the above must be met in order to qualify for hedge accounting.
Answer: D
hedge accounting.
Bloom's: Apply
20
45) What is "hedge accounting?"
A) Any record keeping related to purchase, sale, or valuation of derivatives.
B) Recording options and other derivatives on the Balance Sheet.
C) Matching gains or losses from hedging with losses or gains from the risk being hedged.
D) Using multiple accounting methods to offset the effect of foreign currency exchange.
Answer: C
hedge accounting.
Bloom's: Apply
46) What kind of exposure exists for recognized foreign currency assets and liabilities?
A) Fair value exposure
B) Cash flow exposure
C) Both fair value exposure and cash flow exposure
D) Neither fair value exposure nor cash flow exposure
Answer: B
hedge accounting.
Bloom's: Evaluate
47) What kind of exposure exists for foreign currency firm commitments?
A) Fair value exposure
B) Cash flow exposure
C) Both fair value exposure and cash flow exposure
D) Neither fair value exposure nor cash flow exposure
Answer: C
Difficulty: 3 Hard
hedge accounting.
Bloom's: Evaluate
21
48) What is the requirement for reporting derivatives under international accounting standards
and U.S. GAAP?
A) They may be shown on the balance sheet or they may be treated as off-balance sheet
investments.
B) They must be shown on the balance sheet at fair value.
C) They must be shown on the balance sheet at historical cost.
D) They may be shown on the balance sheet at historical cost or at net realizable value.
Answer: B
Learning Objective: 06-06 Demonstrate the accounting for forward contracts and options used
as cash flow hedges and fair value hedges to hedge foreign currency assets and liabilities, foreign
currency firm commitments, and forecasted foreign currency transactions.
Bloom's: Apply
49) What information is needed to determine the fair value of a foreign currency forward
contract?
A) The forward rate at the date the contract was entered
B) The current forward rate for a contract that matures on the same dates as the forward contract
that was entered into
C) A discount rate to determine the present value of the contract
D) All of the above information is needed
Answer: D
Difficulty: 1 Easy
Bloom's: Apply
22
50) How is the fair value of a foreign currency option calculated?
A) By using the Box-Jenkins technique
B) Using the modified Black-Scholes pricing model
C) Through an arms-length transaction
D) Using quotes given daily in the Wall Street Journal
Answer: B
Difficulty: 1 Easy
Bloom's: Apply
51) Under U.S. GAAP, where are changes in the fair value of derivatives reported?
A) As part of "Accumulated Other Comprehensive Income" on the Balance Sheet
B) They are not recognized until the options are exercised
C) Retained Earnings
Answer: A
Difficulty: 1 Easy
Bloom's: Apply
23
52) Which of the following is done when accounting for a cash flow hedge, but is not done when
accounting for a fair value hedge?
A) The hedged asset or liability is adjusted to fair value.
B) Foreign exchange gains or losses on the hedged asset or liability are recorded in net income.
C) Increases or decreases in a derivative's fair value are recorded in accumulated other
comprehensive income.
D) Gains or losses resulting from adjusting the fair value of a derivative are recorded in net
income.
Answer: C
Bloom's: Apply
53) How should discounts or premiums on forward contracts be treated if the derivative is
hedging a foreign-currency-denominated asset?
A) Carried on the balance sheet until the contract is completed
B) Included in income in the period the derivative is acquired
C) Amortized over the life of the forward contract
Answer: C
Bloom's: Apply
24
54) Under U.S. GAAP, what method of amortizing discounts or premiums on forward contracts
must be used?
A) Weighted average method or accelerated method
B) Sum of digit method only
C) Effective interest rate method or straight line method
D) Straight line method only
Answer: C
Bloom's: Apply
55) On May 1, 2001, Ustar purchased a put option to sell £50,000 on April 30, 2002 at a strike
price equal to $2, which was the spot rate on May 1, 2001. Ustar paid a premium of $0.01 per
pound. How should the option be recorded on May 1, 2001?
A) Debit Foreign Currency Option for $100,500.
B) Credit Foreign Currency Option for $100,500.
C) Debit Foreign Currency Option for $500.
D) Debit Hedge Expense for $500.
Answer: C
Bloom's: Apply
25
56) In hedge accounting, which of the following exposure should be hedged by foreign currency
derivative?
A) Temporal exposure
B) Fair value exposure
C) Derivative exposure
D) Forward contract exposure
Answer: B
Bloom's: Apply
57) When accounting for forward contracts, what is meant by the term "executory contract"?
A) No cash changes hands
B) The CEO of the company is the only one authorized to engage in the contract
C) There must be a price paid for the option
D) The contract is valid if one of the parties sign it
Answer: A
Bloom's: Apply
26
Test Bank for International Accounting, 5th Edition, Timothy Doupnik, Mark Finn, Giorgio Got
58) Excel Sources Inc. is a U.S. incorporated company. Due to change in exchange rate, it
receives $150,000 as payment against a sale of $165,000. Under the two-transaction perspective:
A) no journal entry will be prepared on the date of sale.
B) the sale will be recorded at $150,000 on the date of sale.
C) foreign exchange loss will be recorded for $15,000.
D) Accounts Receivable will be debited for $15,000 on the date of payment.
Answer: C
Difficulty: 1 Easy
Bloom's: Apply
59) Which of the following statements is true of the relationship between foreign currency
transactions, exchange rate changes, and foreign exchange gains and losses?
A) In an export sales, depreciation of the foreign currency causes a foreign exchange gain.
B) In an import purchase, appreciation of the foreign currency causes a foreign exchange gain.
C) In an import purchase, depreciation of the foreign currency causes a foreign exchange loss.
D) In an export sales, appreciation of the foreign currency causes a foreign exchange gain.
Answer: D
exchange risk.
Bloom's: Apply
60) Which of the following statements is true of intrinsic value of options?

A) When the option strike price is more than the spot rate, the intrinsic value is zero.
B) When the option strike price is equal to the spot rate, the intrinsic value is positive.
C) When the option strike price is less than the spot rate, the intrinsic value is zero.
D) When the option strike price is more than the spot rate, the intrinsic value is negative.
Answer: C
Difficulty: 1 Easy
Topic: Option Contracts
Bloom's: Apply
27
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3) What is a "foreign exchange rate?"

5) A bank exchanging foreign currency makes its profit in what manner?

13) What is foreign exchange risk exposure?

15) What is a foreign currency transaction?

Spot rate Forward rate (to 4/1/x2)

Spot rate Forward rate (to 4/1/x2)

Spot rate Forward rate (to 4/1/x2)

Spot rate Forward rate (at February 1, 20x2)

Spot rate Forward rate (at February 1, 20x2)

What is the fair value of the option on December 1, 2001?

What is the fair value of the option on December 31, 2001?

40) What is the intrinsic value of a foreign currency option?

60) Which of the following statements is true of intrinsic value of options?

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