Certified Treasury Professional Exam Foreign Exchange and International Treasury 3

Question 1

The interest rate parity (IRP) condition links forward exchange rates to the difference in:

Accepted Answer

Nominal interest rates between two countries

Answer

Inflation rates between two countries

Answer

GDP growth differentials

Answer

Current account balances

Question 2

A U.S. multinational centralizing FX risk management uses a regional treasury center. Which of the following best describes an in-house bank structure?

Accepted Answer

A central treasury entity intermediates between subsidiaries and external banks

Answer

Third-party bank manages all FX on behalf of subsidiaries

Answer

Subsidiaries deal directly with external banks for all FX needs

Answer

Each subsidiary independently hedges its own FX exposure

Question 3

Which foreign exchange order type specifies execution at the best available rate only if the market moves to or through a specified price level?

Accepted Answer

Limit order

Answer

Market order

Answer

Stop-loss order

Answer

Fill-or-kill order

Question 4

Economic exposure to FX risk is best measured by analyzing the impact of exchange rate changes on a firm's:

Accepted Answer

Future cash flows and competitive position

Answer

Balance sheet translation

Answer

Current accounts receivable

Answer

Reported net income only

Question 5

A currency option that gives the holder the right to sell foreign currency at a fixed strike price is called a:

Accepted Answer

Currency put option

Answer

Currency call option

Answer

Currency forward

Answer

Currency swap

Question 6

Under FASB ASC 815, to qualify for cash flow hedge accounting treatment on an FX forward, the hedging relationship must be:

Accepted Answer

Documented and the hedge must be highly effective, with gains/losses in OCI

Answer

Reported at fair value with gains in OCI only at settlement

Answer

Approved by the SEC before designation

Answer

Executed exclusively through a CFTC-registered exchange