Question

40-)

Don works for the currency trading unit of a large bank in London. He speculates that in the coming months the dollar will rise sharply vs. the pound. What should Don do to act on his speculation?

Select one:

a. Buy a put on the pound.

b. Sell a put on the pound.

c. Sell a call on the pound.

d. Buy a call on the pound.

1-)

Most option profits and losses are realized through taking actual delivery of the currency rather than offsetting contracts.

Select one:

True

False

2-)

Like a forward market hedge, a money market hedge also involves a contract and a source of funds to fulfill that contract. In this instance, the contract is a loan agreement.

Select one:

True

False

Answer 1

Ans -40 correct answer is option ; a. Buy a put on the pound.

Put is right to sales which will make profit in case pound depreciate

Ans 41 : Statement is False : Most option profits and losses are realized through taking actual delivery of the currency rather than offsetting contracts.

Option does not trade in delivery and only financial settlement take place.

Ans 42 : Statement is True : Like a forward market hedge, a money market hedge also involves a contract and a source of funds to fulfill that contract. In this instance, the contract is a loan agreement.