FREE Financial Risk Management MCQ Questions and Answers

Question 1

Which of the following best describes the current exchange rate?

Accepted Answer

Spot exchange rate

Answer

Forward exchange rate

Answer

Uncovered exchange rate

Answer

Interest exchange rate

Question 2

Which of the following best describes the value of one currency compared to another?

Accepted Answer

Exchange rate

Answer

Uncovered interest rate parity

Answer

International Fisher effect

Answer

Interest arbitrage

Question 3

Which of the following concepts best describes the idea that the market will respond in an effort to get uncovered interest rate parity?

Accepted Answer

The international Fisher effect

Answer

The exchange rate

Answer

Interest rate parity

Answer

Interest arbitrage

Question 4

Interest rate risk may have an impact on

Accepted Answer

Bond prices and Reinvestment rates

Answer

Reinvestment rates

Answer

Bond prices

Answer

None of the above

Question 5

There are two methods for reducing interest rate risk that are independent of the kind of bonds bought:

Accepted Answer

Immunization and hedging

Answer

Foresting and hedging

Answer

Immunization and inoculation

Answer

Puts and calls

Question 6

Financial futures contracts are primarily used in hedging strategies for the following reasons:

Accepted Answer

They allow an investor to control a large quantity of a security or commodity for a relatively small investment.

Answer

Futures are not affected by interest rates.

Answer

They can be matched to the investment's maturity.

Answer

You never have to pay any more money than your original investment.

Question 7

Risk of reinvestment rate is of concern because:

Accepted Answer

the ability to reinvest the money received from the bond at the same rate.

Answer

the ability to reinvest the money received from the bond at a higher rate.

Answer

the ability to reinvest the money received from the bond at a lower rate.

Answer

price of a bond