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

IRP states that the forward rate premium or discount equals the interest rate differential between two countries, preventing arbitrage.

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

An in-house bank acts as the internal counterparty for subsidiaries, netting intercompany flows and executing residual hedges with external banks.

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

A limit order executes only at the specified rate or better, giving the treasury manager price certainty on the entry or exit point.

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

Economic exposure captures how exchange rate movements affect the long-run value of the firm through changes in future operating cash flows and competitive dynamics.

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

A currency put option gives the holder the right, but not the obligation, to sell a specified amount of foreign currency at the strike price on or before expiration.

Certified Treasury Professional Exam Practice Test

Certified Treasury Professional Exam Practice Test

Certified Treasury Professional Exam Foreign Exchange and International Treasury 3