AFP AFP Certification CTP Questions & Answers

• Question 921:

  Netting is used by which of the following as a cross-border payment technique?

  A. European giro providers

  B. Foreign subsidiaries of a company

  C. Counterparties in a letter of credit transaction

  D. TARGET participants

  Correct Answer: B

• Question 922:

  Which of the following is a characteristic of giro systems used in countries in Europe?

  A. They operate through their postal systems.

  B. They are primarily used for company-to-company payments.

  C. They do not replace checks for the payment of bills.

  D. They do not allow the use of direct debits and credits.

  Correct Answer: A

• Question 923:

  On the basis of the following exchange rates, which of the following currency amounts has the greatest value in U.S. dollars?

  

  A. C$750,000

  B. ?50,000

  C. 900,000

  D. ?,000,000

  Correct Answer: B

• Question 924:

  A Chicago meat processor is concerned about the volatility of pork belly prices. Which of the following derivative products would be used to fix these prices within a given range?

  A. Collar

  B. Swap

  C. Cap

  D. Spot purchase

  Correct Answer: A

• Question 925:

  In a typical swap transaction, two parties agree to exchange:

  A. notional principal amounts.

  B. amortization schedules.

  C. maturity dates of obligations.

  D. cash flows at future points in time.

  Correct Answer: D

• Question 926:

  A call option for a company has an exercise price of $50. The stock is currently trading at $60. At maturity, what should an investor who paid $3 for the option do?

  A. Exercise the option and gain $7.

  B. Exercise the option and gain $10.

  C. Not exercise the option and lose $3.

  D. Not exercise the option and lose $13.

  Correct Answer: A

• Question 927:

  A put option on a company's stock has an exercise price of $20. On the delivery date, the stock is trading at $24 per share. What should the investor who has paid $2 for the option do?

  A. Not exercise the option and lose $2.

  B. Not exercise the option and lose $6.

  C. Exercise the option and gain $2.

  D. Exercise the option and gain $4.

  Correct Answer: A

• Question 928:

  Which of the following instruments simplifies the paperwork connected with loans that have multiple advance features?

  A. Master note

  B. Banker's acceptance

  C. Indenture agreement

  D. Note purchase agreement

  Correct Answer: A

• Question 929:

  An arrangement in which a borrower makes periodic payments to a separate custodial account that is used to repay debt is known as a:

  A. sinking fund

  B. balloon payment

  C. mortgage

  D. zero-coupon bond

  Correct Answer: A

• Question 930:

  A company plans to issue additional equity within the next 12 months but needs to issue debt at a low interest rate now. Which of the following instruments would BEST meet this objective?

  A. Convertible bonds

  B. Private placement issue

  C. Preferred stock

  D. Subordinated debentures

  Correct Answer: A