20. .............. is the minimum amount which must be remained in a margin account: a) Maintenance margin b) Variation margin c) Initial margin d) None of these 21. The number of future contract outstanding is called ............. ? a) Liquidity b) Float c) Volume d) Turnover . The amount paid for an option is the: a) Strike price b) Discount c) Premium d) Yield . Futures contracts are more successful than interest rate fonrvard contracts because they: a) are less liquid b) have greater default risk c) are more liquid d) have an interest rate tied to the discount rate . The payoffs for financial derivatives linked to: a) Securities that will be issued in the future b) The volatility of interest rates c) previously issued securities d) none of the above . Which of the following is not a problem with an interest rate forward contract? a) Low interest rate b) default risk c) lack of liquidity d) finding a counterparty . Which of the following is a legitimate reason for international investment? a) Dividends from a foreign subsidiary are tax exempt in the United States b) Most governments do not tax foreign corporations c) There are possible benefits from international diversification d) International investments have less political risk than domestic investments 27. Interest-rate parity refers to the concept that: where market imperfections are few, a) the same goods must sell for the same price across countries b) interest rates across countries will eventually be the same c) there is an offsetting relationship between interest rate differentials and differentials in the forward spot exchange market d) there is an offsetting relationship provided by costs and revenues in similar market environments 28. The forward market is especially well-suited to offer hedging protection against: a) translation risk exposure b) transactions risk exposure c) political risk exposure d) taxation 29. Suppose that the Japanese yen is selling at a forward discount in the forward-exchange market. This implies that most likely: a) this currency has low exchange-rate risk b) this currency is gaining strength in relation to the dollar c) interest rates are higher in Japan than in the United States d) interest rates are declining in Japan 30. Following FASB Statement No. 52, gains or losses from currency translation are shown: a) on the income statement as currency gains (or losses) b) on the balance sheet as an adjustment to owners' equity c) on the balance sheet as an adjustment to cash d) nowhere because gains or losses from currency changes need not be shown 31. All of the following are hedges against exchange-rate risk EXCEPT a) balancing monetary assets and liabilities b) use of spot market c) foreign-currency swaps d) adjustment of funds commitments between countries