1. Twice, Inc., a multinational company based in Korea, entered into an agreement with Blackpink Universal Bank on the c
Posted: Wed May 18, 2022 10:47 pm
1. Twice, Inc., a multinational company based in Korea, entered
into an agreement with Blackpink Universal Bank on the company's
management of its foreign currencies. As per the agreement,
Blackpink receives an upfront payment, but it agrees to sell USDKRW
to Twice (should it chooses to do so) at an agreed upon rate based
on current forward prices for the tenors stipulated in the
agreement. Which of the following FX products does this agreement
fall into?
a. FX Swap
b. FX Spot
c. FX Futures
d. FX Options
2. Six months ago, a multinational corporation (MNC) based in
the Philippines entered into a 6-month FX forward with Citibank,
where the MNC buys USD at 48.50 at the end of six months in
anticipation of its USD loan payment today (which is the maturity
of the forward). The following statements are most likely accurate
EXCEPT:
a. The 6-month forward price of USDPHP six months ago is
48.50.
b. The 6-month forward price of USDPHP today is 48.50.
c. The MNC will buy USD at 48.50 from Citibank even if the PHP
depreciates greatly.
d. The MNC will buy USD at 48.50 from Citibank even if the PHP
appreciates greatly.
3. Because of external pressure and soaring domestic inflation,
the Bangko Sentral ng Pilipinas (BSP) announces a surprise 200 bps
rate hike pushing policy rates up to 4.00% from the current 2.00%.
Assuming all else equal, which of the following scenario for the
peso is likely to occur?
a. USDPHP depreciates due to the relatively higher interest
rates.
b. USDPHP depreciates due to the increase in PH's imports and
increase in exports.
c. USDPHP appreciates due to the relatively low expected local
inflation.
d. USDPHP appreciates due to the increase in PH's imports and
decrease in exports.
4. Which of the following best describes the limitation of the
Purchasing Power Parity in forecasting expected exchange rate
movements?
a. Exchange rate movement is not driven solely by inflation, but
several other factors as well.
b. The difference in interest rates between two countries are
not always consistent with the inflation differential.
c. The changes in expectations of future exchange rates are more
apparent when real-life trade data are considered.
d. Government control pays an important role in normalizing
exchange rates hence PPP results can be misleading.
into an agreement with Blackpink Universal Bank on the company's
management of its foreign currencies. As per the agreement,
Blackpink receives an upfront payment, but it agrees to sell USDKRW
to Twice (should it chooses to do so) at an agreed upon rate based
on current forward prices for the tenors stipulated in the
agreement. Which of the following FX products does this agreement
fall into?
a. FX Swap
b. FX Spot
c. FX Futures
d. FX Options
2. Six months ago, a multinational corporation (MNC) based in
the Philippines entered into a 6-month FX forward with Citibank,
where the MNC buys USD at 48.50 at the end of six months in
anticipation of its USD loan payment today (which is the maturity
of the forward). The following statements are most likely accurate
EXCEPT:
a. The 6-month forward price of USDPHP six months ago is
48.50.
b. The 6-month forward price of USDPHP today is 48.50.
c. The MNC will buy USD at 48.50 from Citibank even if the PHP
depreciates greatly.
d. The MNC will buy USD at 48.50 from Citibank even if the PHP
appreciates greatly.
3. Because of external pressure and soaring domestic inflation,
the Bangko Sentral ng Pilipinas (BSP) announces a surprise 200 bps
rate hike pushing policy rates up to 4.00% from the current 2.00%.
Assuming all else equal, which of the following scenario for the
peso is likely to occur?
a. USDPHP depreciates due to the relatively higher interest
rates.
b. USDPHP depreciates due to the increase in PH's imports and
increase in exports.
c. USDPHP appreciates due to the relatively low expected local
inflation.
d. USDPHP appreciates due to the increase in PH's imports and
decrease in exports.
4. Which of the following best describes the limitation of the
Purchasing Power Parity in forecasting expected exchange rate
movements?
a. Exchange rate movement is not driven solely by inflation, but
several other factors as well.
b. The difference in interest rates between two countries are
not always consistent with the inflation differential.
c. The changes in expectations of future exchange rates are more
apparent when real-life trade data are considered.
d. Government control pays an important role in normalizing
exchange rates hence PPP results can be misleading.