cha 23 - 8th edition

cha 23 - 8th edition - Chapter 23 Key 1. Long-term...

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Chapter 23 Key 1. Long-term financial risk arising from permanent changes in prices or other economic fundamentals is called: a. forward risk. b. volatility exposure. C . economic exposure. d. transactions exposure. e. translation risk. Ross - Chapter 023 #5 SECTION: 23.2 TOPIC: ECONOMIC EXPOSURE TYPE: DEFINITIONS 2. What was the highest price per troy ounce for the December silver futures contract today? a. $13.684 B . $13.847 c. $13.801 d. $13.623 e. $13.639 Ross - Chapter 023 #30 SECTION: 23.4 TOPIC: FUTURES PRICE TYPE: CONCEPTS 3. Which one of the following statements concerning option payoffs is correct? a. The buyer of a call profits when the exercise price exceeds the market price. b. The buyer of a call profits when the strike price exceeds the exercise price. c. A put will only be exercised if both the seller and the buyer can profit. d. Both the buyer and the seller profit when a call is exercised. E . The seller of a put incurs a loss when a put is exercised. Ross - Chapter 023 #47 SECTION: 23.6 TOPIC: OPTION PAYOFF TYPE: CONCEPTS
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4. A financial asset that represents a claim to another financial asset is called a(n): a. forward agreement. B . derivative security. c. mezzanine asset. d. contingent security. e. junior security. Ross - Chapter 023 #2 SECTION: 23.1 TOPIC: DERIVATIVE SECURITY TYPE: DEFINITIONS 5. By hedging financial risk, firms can: a. ensure a steady rate of return for their shareholders. b. eliminate price changes over the long-term. c. ensure their own economic viability. D . gain time to adapt to changing market conditions. e. eliminate their exposure to price increases in raw materials. Ross - Chapter 023 #21 SECTION: 23.2 TOPIC: HEDGING TYPE: CONCEPTS 6. The buyer of a forward contract: a. is obligated to make delivery and accept the forward price. b. has the option of taking delivery and paying the lesser of the spot market price or the contract price. c. has the option of making delivery and receiving the higher of the spot market price or the contract price. d. is obligated to take delivery and pays the lower of the spot market price or the contract price. E . is obligated to take delivery and pay the forward price. Ross - Chapter 023 #22 SECTION: 23.3 TOPIC: FORWARD CONTRACT TYPE: CONCEPTS 7. A payoff profile helps: a. determine the price of an option contract. b. determine whether a forward or a futures contract is needed. C . demonstrate the effect of a hedge. d. determine the price of a collar. e. demonstrate the effects of a swap. Ross - Chapter 023 #26 SECTION: 23.3 TOPIC: PAYOFF PROFILE TYPE: CONCEPTS
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8. Your firm currently has all fixed-rate debt. You would like to convert part of this to floating-rate debt. You should consider a(n): a. option on floating-rate bonds. b. forward contract on U.S. Treasury bills.
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This note was uploaded on 07/20/2011 for the course FINANCE 499 taught by Professor Majdalani during the Summer '11 term at Cornell.

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cha 23 - 8th edition - Chapter 23 Key 1. Long-term...

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