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Question 1 0 of 1 points
A stock is selling at $5 and you expect the price to drop to $2 in the next 3 months.
What would you do
Selected C. Take up a share financing facility. Sell the share at $5 now, buy
Answer: the share in 3 months time at $2 and make a profit of $3.
Correct D. Take up a share borrowing facility. Sell the share at $5 now,
Answer: buy the share in 3 months time at $2.
Feedback: Wrong.
Remember the concept of "Buy low and sell high" inorder to make
profit.
Position Limits
Description: The maximum value of deals a trader can make on a
particular day.
Rationale for Existence: Position limits restrict the amount of risk that
a particular trader can be exposed to. It helps the bank control its
outstanding trades as well as losses on trades made by the trader.
Stop-Loss Limits
Description: The maximum amount of loss that the bank can tolerate.
Rationale for Existence: Stop-loss limits are used to 'cut' the amount
of losses the bank has for any given type of investment instrument.
Counterparty Limits
Description: The maximum amount of trade exposure the bank is
willing to undertake with a particular counterparty. eg bank,
corporation, individual.
Rationale for Existence: To limit the counterparty risk that the bank
faces. Counterparty Risk is the risk that the counterparties the bank
trades with may not be able to repay their debts.
Settlement Limits
Description: The maximum amount of outstanding trades which the
bank must settle on a trading day.
Rationale for Existence: To limit settlement risk that bank is exposed
to. Settlement Risk is the risk that arises from a non-simultaneous
exchange of payments.
Country Limits
Description: The maximum amount of trade exposure the bank is
willing to undertake with a particular country and or its currency.
Rationale for Existence: To limit the country risk that the bank is
exposed to. Country Risk arises when counterparty is unable or
unwilling to settle outstanding transactions because of domestic
country crisis or restrictions.
Question
0 of 1 points
4
Which of the following are benefits of investing in mutual funds?
Share borrowing:
Question
1 of 1 points
7
From the following table, determine the exchange rate for EUR/AUD?
Question
0 of 1 points
10
Which type of order will an investor place to instruct his broker to buy a security at
a SPECIFIC price?
Selected Answer: B. Market order
Correct Answer: C. Limit order
Feedback: Wrong.
There are three (3) types of securities orders:
Question
1 of 1 points
11
Your parents promised to give you $5,000 if you graduate with a GPA score of at
least 3 in two years time. How much is the amount worth today if current interest
is 5%?
Question
1 of 1 points
12
Audrey places USD 5 million in the money market. At the end of 180 days, she
will receive USD 5.06 million. Calculate the annualized yield.
Selected Answer: C.
2.43%
Correct Answer: C.
2.43%
Feedback: Correct.
Annualized yield = (Future Value - Principal) x 365
Principal n
= 2.43%
Question
1 of 1 points
13
Which of the following does NOT describe the foreign exchange market?
Selected Answer: A. It operates 24 hours, 5 days a week
Correct Answer: A. It operates 24 hours, 5 days a week
Feedback: Correct.