FX Risk Exposure of an FI Essentially Relates to Which

question 37

Multiple Choice

FX risk exposure of an FI essentially relates to which of the following activities?

• A)Purchase and sale of foreign currencies to allow customers to participate in and complete international commercial trade transactions.
• B)Purchase and sale of foreign currencies to allow customers to take positions in foreign real and financial investments.
• C)Purchase and sale of foreign currencies for hedging purposes to offset customer exposure in any given currency.
• D)Purchase and sale of foreign currencies for speculative purposes through forecasting or anticipating future movements in FX rates.
• E)None of the options.

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Definitions:

Maturity

The final payment date of a loan or financial instrument at which point the principal (and all remaining interest) is due to be paid.

Covenants

Agreements or promises in a formal loan or bond agreement that cover certain conditions, actions, or restrictions taken by the borrower.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of the business.

Dividend

A portion of a company's earnings, decided by the board of directors, to be distributed among shareholders, typically in the form of cash payments or additional shares.