Which one of the following statements is true? 1. Derivative securities are used to minimize or...
Which one of the following statements is true?
| 1. |
Derivative securities are used to minimize or eliminate an investor’s or a firm’s exposure to various types of risk that they may be exposed to. |
|
| 2. |
Derivatives are financial securities which are based upon or derived from existing securities. |
|
| 3. |
Risk to an investor or a firm can be caused by interest rate changes or foreign exchange rate changes, commodity prices or stock prices. |
|
| 4. |
all of the above |
Homework Answers
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Which one of the following statements is true?
1.
Derivative securities are used to minimize or...
One function of the foreign exchange market is to Multiple Choice provide some insurance against foreign...
One function of the foreign exchange market is to Multiple Choice provide some insurance against foreign exchange risk. protect short-term cash flow from adverse changes in exchange rates. eliminate volatile changes in exchange rates. reduce the economic exposure of a firm. enable companies to engage in capital flight when countertrade is not possible. Rhonda tells Kevin that he will receive 0.86 euro for every U.S. dollar he wants to convert. Rhonda is referring to Multiple Choice the exchange rate. arbitration....
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Which of the following statements about risk-neutral pricing is most accurate? Select one: While most investors are risk averse, it doesn’t matter if we assume that investors are risk neutral for the purpose of pricing derivatives. The risk-neutral approach was state of the art until Black-Scholes developed their Nobel-prize-winning formula. Some investors are risk-averse, some are risk-neutral and some are risk-seeking. Market prices represent a consensus of various investors’ opinions. As such, prices reflect an averaging of various investors’ opinions,...
10.Which one of the following statements is NOT true? Select one: A. The risk that the...
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Fair Value Measurements The fair values of our financial assets and liabilities as of December 26,...
Fair Value Measurements The fair values of our financial assets and liabilities as of December 26, 2015 and December 27, 2014 are categorized as follows: 2015 2014 Assets(a) Liabilities(a) Assets(a) Liabilities(a) Available-for-sale securities: Equity securities (b) $ 127 $ - $ 124 $ Debt securities (c) 7,231 - 3,167 $ 7,358 $ - $ 3,291 $ Short-term investments (d) $ 193 $ - $ 197 $ - Prepaid forward contracts (e) $ 27 $ - $ 26 $ Deferred compensation...
Which of the following is a reason why budgets in multinational companies are not used to evaluate the firm's perfo...
Which of the following is a reason why budgets in multinational companies are not used to evaluate the firm's performance relative to its budgets? 0 A. 0 B. Evaluations based on budgets can be meaningless due to factors such as exchange rate risk and other volatility. Evaluations based on relative regional performance are considered more meaningful as compared to evaluations against budgets. ° C. Evaluations based on budgets are harder when managers use sophisticated techniques to minimize foreign currency exposure....
15. Which of the following is true for a closed economy with regard to savings and...
15. Which of the following is true for a closed economy with regard to savings and invest- ment? (a) S> 1 (b) S< I (c) S<I (d) S -I 16. What risks does an investor face when buying foreign government bonds using an Un- covered Interest Parity strategy (UIP)? (a) This investment strategy leaves investors exposed to only one major risk: that the exchange rate will move unfavourably against them issuer of the asset they have purchased will default on...
1. Which of the following statements about the OTC market is true? A. An OTC market...
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Which of the following describes equity securities, rather than debt securities or derivatives? a) They are...
Which of the following describes equity securities, rather than debt securities or derivatives? a) They are best for hedging against changes in currency exchange rates. b) They offer a fixed rate of return. c) They typically generate the highest returns of the three types of marketable securities. d) They carry more risk than debt securities, but less than derivatives. Place the following steps for developing a credit policy in the correct order of process: A: The company decides that it...
Which of the following was NOT one of the main tools the Fed used in the...
Which of the following was NOT one of the main tools the Fed used in the Great Recession to avoid problems caused by the zero lower bound? O A. exchange rate easing OB, quantitative easing OC. forward guidance When the Fed alters the types of assets it owns, it is using A. exchange rate easing B. forward guidance C. quantitative easing When the Fed increases its quantity of assets, by effectively printing money and buying securities in the open market,...
QUESTION 18 Which of the following statements is CORRECT? 1. An investor can eliminate virtually all...
QUESTION 18
Which of the following statements is CORRECT?
1.
An investor can eliminate virtually all diversifiable risk if
he or she holds a very large, well-diversified portfolio of
stocks.
2.
Once a portfolio has about 40 stocks, adding additional stocks
will not reduce its risk by even a small amount.
3.
It is impossible to have a situation where the market risk of
a single stock is less than that of a portfolio that includes the
stock.
4.
An...
Fair Value Measurements The fair values of our financial assets and liabilities as of December 26, 2015 and December 27, 2014 are categorized as follows: 2015 2014 Assets(a) Liabilities(a) Assets(a) Liabilities(a) Available-for-sale securities: Equity securities (b) $ 127 $ - $ 124 $ Debt securities (c) 7,231 - 3,167 $ 7,358 $ - $ 3,291 $ Short-term investments (d) $ 193 $ - $ 197 $ - Prepaid forward contracts (e) $ 27 $ - $ 26 $ Deferred compensation...
Which of the following is a reason why budgets in multinational companies are not used to evaluate the firm's performance relative to its budgets? 0 A. 0 B. Evaluations based on budgets can be meaningless due to factors such as exchange rate risk and other volatility. Evaluations based on relative regional performance are considered more meaningful as compared to evaluations against budgets. ° C. Evaluations based on budgets are harder when managers use sophisticated techniques to minimize foreign currency exposure....
15. Which of the following is true for a closed economy with regard to savings and invest- ment? (a) S> 1 (b) S< I (c) S<I (d) S -I 16. What risks does an investor face when buying foreign government bonds using an Un- covered Interest Parity strategy (UIP)? (a) This investment strategy leaves investors exposed to only one major risk: that the exchange rate will move unfavourably against them issuer of the asset they have purchased will default on...
Which of the following was NOT one of the main tools the Fed used in the Great Recession to avoid problems caused by the zero lower bound? O A. exchange rate easing OB, quantitative easing OC. forward guidance When the Fed alters the types of assets it owns, it is using A. exchange rate easing B. forward guidance C. quantitative easing When the Fed increases its quantity of assets, by effectively printing money and buying securities in the open market,...
QUESTION 18
Which of the following statements is CORRECT?
1.
An investor can eliminate virtually all diversifiable risk if
he or she holds a very large, well-diversified portfolio of
stocks.
2.
Once a portfolio has about 40 stocks, adding additional stocks
will not reduce its risk by even a small amount.
3.
It is impossible to have a situation where the market risk of
a single stock is less than that of a portfolio that includes the
stock.
4.
An...
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