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1. All of the four following exotic options are path-independent options, EXCEPT:

2. The value of which one of the following four option types is typically dependent on both the final price of its underlying asset and its own price history?

3. A large energy company has a recurring foreign currency demands, and seeks to use options with a pay-off based on the average price of the underlying asset on either a few specific chosen dates or all dates within a specific pricing window.

Which one of the following four option types would most likely meet these specific foreign currency demands?

4. In the United States, foreign exchange derivative transactions typically occur between

5. Which one of the following four option types has two strike prices?

6. When trading exotic options, one needs to consider the following risks:

I. Spot foreign exchange risks

II. Forward foreign exchange risks

III. Plain vanilla options risks

IV. Option-specific risks

7. Which one of the following four global markets for financial assets or instruments is widely believed to be the most liquid?

8. By foreign exchange market convention, spot foreign exchange transactions are to be exchanged at the spot date based on the following settlement rule:

9. Foreign exchange rates are determined by various factors. Considering the drivers of exchange rates, which one of the following changes would most likely strengthen the value of the USD against other foreign currencies?

10. As Japan ___ its budget deficits and ___ its dependence on debt, the Japanese currency, JPY, would ___ in value against other currencies.

11. For which one of the following four reasons do corporate customers use foreign exchange derivatives?

I. To lock in the current value of foreign-denominated receivables

II. To lock in the current value of foreign-denominated payables

III. To lock in the value of expected future foreign-denominated receivables

IV. To lock in the value of expected future foreign-denominated payables

12. Most loans and deposits in the interbank market have a maturity of:

13. Beta Insurance Company is only allowed to invest in investment grade bonds.

To maximize the interest income, Beta Insurance Company should invest in bonds with which of the following ratings?

14. Which one of the following four statements on the seniority of corporate bonds is incorrect?

15. Which of the following statements regarding bonds is correct?

I. Interest rates on bonds are typically stated on an annualized rate.

II. Bonds can pay floating coupons that are directly linked to various interest rate indices.

III. Convertible bonds have an element of prepayment risk.

IV. Callable bonds have an element of equity risk.

16. What is generally true of the relationship between a bond's yield and it's time to maturity when the yield curve is upward sloping?

17. What is the explanation offered by the liquidity preference theory for the upward sloping yield curve shape?

18. Which one of the following changes would typically increase the price of a fixed income instrument, such as a bond?

19. Changes to which one of the following four factors would typically not increase the cost of credit?

20. Which of the following factors would typically increase the credit spread?

I. Increase in the probability of default of the issuer.

II. Decrease in risk premium.

III. Decrease in loss given default of the issuer.

IV. Increase in expected loss.