International Finance and Treasury MCQs

✅ The correct answer is option D.
Markowitz efficient hypothesis initiated in 1960. Harry Markowitz model (HM model), also known as Mean-Variance Model because it is based on the expected returns (mean) and the standard deviation (variance) of different portfolios, helps to make the most efficient selection by analyzing various portfolios of the given assets.

✅ The correct answer is option A.
Yield on subordinated bonds as compared to non-subordinated bonds is considered as highly risky and higher yields. Subordinated debentures are thus also known as junior securities. In the case of borrower default, creditors who own subordinated debt will not be paid out until after senior bondholders are paid in full.

✅ The correct answer is option C.
Asset allocation is procedure of scattering your assets between numerous different kinds of investments to lessen risk. Asset allocation is an investment strategy that aims to balance risk and reward by apportioning a portfolio’s assets according to an individual’s goals, risk tolerance and investment horizon.

✅ The correct answer is option A.
In financial transactions, risk that there will be no profit in selling of this asset is classified as price risk. Price risk is the potential for the decline in the price of an asset or security relative to the rest of the market. It excludes market risk, or the potential for an entire market to go down in value. As such, price risk is the component of investing risk that can be reduced with diversification.

✅ The correct answer is option B.
The components of Balance of Payment includes Current account and official reserves.

✅ The correct answer is option A.
Exchange rate of foreign currency fluctuate day to day because of demand and supply. An exchange rate is the value of one nation’s currency versus the currency of another nation or economic zone.

✅ The correct answer is option D.
A country has a negative balance of trade it means the balance of payments on current account should be same as balance of trade. The balance of trade is the difference between the value of a country’s imports and exports for a given period. The balance of trade is the largest component of a country’s balance of payments.

✅ The correct answer is option B.
Interest rate on floating rate Eurobonds is paid semi-annually. Eurobonds are interest-bearing securities issued in the Eurobond market.

✅ The correct answer is option A.
Time value of an option = Price of an option – Intrinsic value of an option
= $560 – $450 = $110.

✅ The correct answer is option C.
Inflation rate in United States is added into real rate of interest to calculate interest rate in United States. Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time.