F9 (FM) – PART G – CBE MCQs – ACCA

These are ACCA F9 (FM) Financial Management MCQs for Part-G of the Syllabus “Risk management”.

These multiple-choice questions (MCQs) are designed to help ACCA F9 students to better understand the exam format. We aim to instill in students the habit of practicing online for their CBE exams. By doing so, students can reduce exam stress and prepare more effectively.

Please note:

  • Students should not attempt these MCQs until they have finished the entire chapter.
  • All questions are compulsory, so please do not skip any.

We hope that these MCQs will be a valuable resource for students preparing for the ACCA F9 (FM) exam.

INFORMATION ABOUT THESE CBE MCQs Test/Quiz

Course:ACCG – Association of Chartered Certified Accountants
Fundamental Level:Applied Skills
Subject:Financial Management
Paper:F9 – FR
Chapter and Topic
  • The nature and types of risk and approaches to risk management,
  • Causes of exchange rate differences and interest rate fluctuations,
  • Hedging techniques for foreign currency risk,
  • Hedging techniques for interest rate risk
Syllabus Area:G – “Risk management”
Questions Type:CBE MCQs
Exam Section:Section A

Syllabus Area

These Multiple Choice Questions (MCQs) cover the Syllabus Area Part G of the Syllabus; “Risk management” of ACCA F9 (FM) Financial Management Module.

Time

These MCQs are not time-bound. Take your time and solve them without stress. Pay proper attention and focus. Do not rush or hesitate

Result

Students will get their F9 CBE MCQs Test results after they finish the entire test. They will also be able to see the correct and incorrect answers, as well as explanations for the incorrect questions.

Types of Questions

MCQs: Choose one from the given options.
Multiple choice: Choose all those answers which seem correct/ or incorrect to you, as per the requirement of the question. Keep your eye on the wording “(select all those which are correct/ or incorrect)“.
Drop-down: Select from the list provided.
Type numbers: Type your answer in numbers as per the requirement of the question.

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F9 (FM) - Part G - MCQs - Risk management

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F9 (FM) - Financial Management
Syllabus Area: G - Risk management
Chapter: 19 Foreign currency risk, 20 Interest rate risk
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
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1 / 15

Which of the following statements are CORRECT?

  1. Interest rate options allow the buyer to take advantage of favourable interest rate movements
  2. A forward rate agreement does not allow a borrower to benefit from a decrease in interest rates
  3. Borrowers hedging against an interest rate increase will buy interest rate futures now and sell them at a future date

2 / 15

A company that has a $10m loan with a variable rate of interest, has acquired a forward rate agreement (FRA) with a financial institution that offered a 3–6, 3.2% – 2.7% spread.

What would be the payment made to the financial institution under the terms of the FRA if the actual rate of interest was 3%? (to the nearest dollar)

$_______

3 / 15

Which of the following statements concerning the causes of interest rate fluctuations is CORRECT?

4 / 15

Which of the following statements are correct?

  1. The general level of interest rates is affected by investors' desire for a real return
  2. Market segmentation theory can explain kinks (discontinuities) in the yield curve
  3. When interest rates are expected to fall, the yield curve could be sloping downwards

5 / 15

Act Co wishes to hedge interest rate movements on a borrowing it intends to make three months from now for a further period of six months.

Which TWO of the following will best help Act Co hedge its interest rate risk?

6 / 15

An investor plans to exchange $1,000 into euros now, invest the resulting euros for 12 months, and then exchange the euros back into dollars at the end of the 12-month period. The spot exchange rate is €1.415 per $1 and the euro interest rate is 2% per The dollar interest rate is 1.8% per year.

Compared to making a dollar investment for 12 months, at what 12-month forward exchange rate will the investor make neither a loss nor a gain?

7 / 15

Handria is a country that has the peso for its currency and Wengry is a country that has the dollar ($) for its currency.

The current spot exchange rate is 1.5134 pesos = $1.

Using interest-rate differentials, the one year forward exchange rate is 1.5346 pesos = $1.

The currency market between the peso and the dollar is assumed perfect and the International Fisher Effect holds.

Which of the following statements is TRUE?

8 / 15

The current spot rate for the peso (the currency of country P) to the $ (the currency of country A) is 2 peso:$1. Annual interest rates in the two countries are 8% in country P, and 4% in country A.

What is the three months forward rate (to four decimal places) in terms of peso to the $?

9 / 15

A company whose home currency is the dollar ($) expects to receive 500,000 pesos in 6 months' time from a customer in a foreign country. The following interest rates and exchange rates are available to the company:

Spot rate 15.00 peso per $
Six-month forward rate 15.30 peso per $
Home country Foreign country
Borrowing interest rate 4% per year 8% per year
Deposit interest rate 3% per year 6% per year

Working to the nearest $100, what is the 6-month dollar value of the expected receipt using a money market hedge?

10 / 15

In comparison to forward contracts, which TWO of the following are true in relation to futures contracts?

11 / 15

A US company owes a European company €3.5m due to be paid in 3 months' The spot exchange rate is $1.96 – $2:€1 currently. Annual interest rates in the two locations are as follows:

Borrowing Deposit
US 8% 3%
Europe 5% 1%

What will be the equivalent US$ value of the payment using a money market hedge?

12 / 15

Which of the following derivative instruments are characterized by a standard contract size?

  1. Futures contract
  2. Exchange-traded option
  3. Forward rate agreement
  4. Swap

13 / 15

The forward rate is 8500 – 0.8650 euros to the 1$.

What will a €2,000 receipt be converted to at the forward rate?

14 / 15

The current euro/US dollar exchange rate is €1:$2. ABC Co, a Eurozone company, makes a $1,000 sale to a US customer on credit. By the time the customer pays, the euro has strengthened by 20%.

What will the euro receipt be? (to the nearest euro)

€_____

15 / 15

Exporters Co is concerned that the cash received from overseas sales will not be as expected due to exchange rate movements.

What type of risk is this?

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