This month’s free video lecture comes from one of the dozens of online lessons Wiley CPAexcel recently updated ahead of the July 2015 CPA Exam changes. We’ve also included a few sample questions to test your knowledge. Check it out! Featuring Professor Pam Smith of the Northern Illinois University, this video lecture provides a broad introduction to Forward and Options Contracts, which is part of an always-evolving topic on the FAR section of the exam: Foreign Exchange Hedges. There’s been quite a few minor updates to this topic with the recent changes to the CPA Exam, so pay close attention to what’s discussed during this lecture.
Got all that? OK, here’s a few quick questions to test your knowledge. The full Wiley CPAexcel lesson on this topic includes an in-depth study text as well as dozens more practice questions. For the answers, scroll down to the end of this blog post. Good luck!
1) Which one of the following would be a foreign currency transaction for the U.S. entity?
A. U.S. entity purchases goods from a Swiss entity to be settled in dollars.
B. German entity purchases goods from a U.S. entity to be settled in dollars.
C. U.S. entity purchases goods from a British entity to be settled in pounds sterling.
D. U.S. entity sells goods to a Russian entity to be settled in dollars.
2) Which of the following statements concerning foreign exchange forward contracts is/are correct?
I. A foreign currency forward exchange contract will result in the exchange of currencies.
II. All forward contracts require the exchange of currencies.
A. I only.
B. II only.
C. Both I and II.
D. Neither I nor II.
3) Which of the following is not a characteristic associated with foreign currency transactions?
A. Are denominated in a foreign currency.
B. Can include contracts to exchange currencies.
C. Are affected by changes in currency exchange rates.
D. Occur only when initiated by a foreign entity.
Check back in a few weeks for our next free video lecture.