Intermediate Financial Accounting 2_Ch 16 MCQ.docx - Chapter 16(3 Questions for Final Exam 1 Derivative instruments a require significant investments b

Intermediate Financial Accounting 2_Ch 16 MCQ.docx -...

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Chapter 16 (3 Questions for Final Exam) 1. Derivative instruments a) require significant investments.b) transfer financial risks.c) transfer primary instruments.d) are settled at the date of issuance. 2. Derivatives exist to help companies 3. Credit risk is the risk that 4. The three types of market risk are 5. A speculator’s objective is to a) reduce pre-existing risks.b) take delivery of the underlying.c) take advantage of information asymmetry.d) maximize potential returns by being exposed to greater risks. 6. An arbitrageur depends on 7. Derivatives should be valued at 8. Gains on derivatives should 9. If a company writes an option, it a) pays a fee and gains a right.b) charges a fee and gives the holder a right.c) charges a fee for handling option transactions.
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d) endorses an option over to another party. 10. A call option is a right to
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