Which of the Following Is NOT True Regarding Nondeliverable Forward

question 67

Multiple Choice

Which of the following is NOT true regarding nondeliverable forward (NDF) contracts?

• A) NDFs are used primarily for emerging market currencies.
• B) Pricing of NDFs reflects basic interest rate differentials plus an additional premium charged for dollar settlement.
• C) NDFs can only be traded by central banks.
• D) All of the above are true.

Recognize the effectiveness of organizing tools like topic sentences, section headings, and tables of contents in enhancing document clarity.

Understand the application and limitations of the problem-methods-solution pattern in organizing content.

Categorize information effectively based on the nature and requirements of the document.

Appreciate the chronological pattern for explaining events or processes in a logical sequence.

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Definitions:

Gain on Sale

The financial profit realized from the sale of an asset, which exceeds its purchase price.

Available-for-Sale Securities

Financial assets that are not classified as held-to-maturity or trading securities, and can be sold in the short-term to meet liquidity needs.

Security Investments

Investments in tradable financial assets such as stocks, bonds, or other securities aiming for capital appreciation or income generation.

Fair Value

An estimation of the price at which an asset would change hands between willing parties, neither under compulsion to buy nor sell, and both having reasonable knowledge of relevant facts.