CIMA Exam CIMAPRA19-P03-1 Topic 4 Question 26 Discussion

Actual exam question for CIMA's CIMAPRA19-P03-1 exam

Question #: 26
Topic #: 4

Zia is an accountant and wishes to take out a Forward Rate Agreement (FRA)as a hedging instrument. The company treasurer has advised that a short-term interest rate (STIR)future would be better.

Which of the following is true of an STIR?

AA STIR can be tailored to the exact needs of the company.

BA STIR is flexible and the position can be closed quickly and easily.

CA STIR must be kept for the whole duration of the contract.

DIf interest rates have gone down the price of the future will have fallen.

Show Suggested Answer

Suggested Answer: B, C, E

by Dean at Mar 28, 2023, 02:25 PM

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Jaleesa

1 months ago

Hmm, I'm not sure about this one. Maybe I should just ask the treasurer to explain the differences between FRAs and STIR futures in simple terms. Accountants aren't known for their finance skills, you know.

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Boris

15 days ago

User 3: That's true, a STIR is flexible and the position can be closed quickly and easily.

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Avery

17 days ago

User 2: A STIR can be tailored to the exact needs of the company.

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Reita

18 days ago

User 1: Maybe you should ask the treasurer for more information.

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Raylene

2 months ago

Wait, did the company treasurer actually suggest a STIR future? Sounds like they're trying to get Zia to lose money on the trade. I'd double-check that advice.

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