B 6- Financial Decisions, Financial Risk Managment

Pregunta 1 de 26

1

What would be the primary reason for a company to agree to a debt covenant limiting the percentage of its long-term debt?

Selecciona una o más de las siguientes respuestas posibles:

To reduce the coupon rate on the bonds being sold.
To cause the price of the company's stock to rise.
To reduce the risk for existing bondholders.
To lower the company's bond rating.

Explicación

Pregunta 2 de 26

1

Bander Co. is determining how to finance some long-term projects. Bander has decided it prefers the benefits of no fixed charges, no fixed maturity date and an increase in the credit-worthiness of the company. Which of the following would best meet Bander's financing requirements?

Selecciona una o más de las siguientes respuestas posibles:

Bonds.
Short-term debt
Long-term debt
Common stock.

Explicación

Pregunta 3 de 26

1

Which of the following types of bonds is most likely to maintain a constant market value?

Selecciona una o más de las siguientes respuestas posibles:

Callable.
Floating-rate
Zero-coupon.
Convertible

Explicación

Pregunta 4 de 26

1

Managers that anticipate greater return for greater risk are referred to as having what attitude toward risk?

Selecciona una o más de las siguientes respuestas posibles:

Risk indifferent.
Risk seeking.
Cautious.
Risk averse.

Explicación

Pregunta 5 de 26

1

If an investor's certainty equivalent is greater than the expected value of an investment alternative, the investor is said to be:

Selecciona una o más de las siguientes respuestas posibles:

Cautious.
Risk seeking.
Risk averse
Risk indifferent.

Explicación

Pregunta 6 de 26

1

Investment managers develop portfolios of different investments to combine, offset, and thereby reduce overall risk. Not all risks can be eliminated by development of a portfolio. Risks that cannot be eliminated through a portfolio are called:

Selecciona una o más de las siguientes respuestas posibles:

Firm-specific risks.
Unsystematic risks.
Non-market risks.
Systematic risks.

Explicación

Pregunta 7 de 26

1

The marketable securities with the least amount of default risk are:

Selecciona una o más de las siguientes respuestas posibles:

U.S. Treasury securities.
Federal government agency securities.
Bankers' acceptances.
Repurchase agreements

Explicación

Pregunta 8 de 26

1

When purchasing temporary investments, which one of the following best describes the risk associated with the ability to sell the investment in a short period of time without significant price concessions?

Selecciona una o más de las siguientes respuestas posibles:

Interest rate risk
Liquidity risk.
Financial risk
Purchasing power risk.

Explicación

Pregunta 9 de 26

1

Hedgehog International has a receivable valued at 500,000 local currency units from its foreign customer due in 90 days. The current spot rate of the local currency unit is $.60. Hedgehog purchases a put option to sell the local currency unit in 90 days for $.61 for a premium of $.005. The exchange rate for the local currency increases to $.63 in 90 days. What will Hedgehog do on the receivable's settlement date?

Selecciona una o más de las siguientes respuestas posibles:

Hedgehog will not exercise the option and sell local currency units collected from its receivable at the spot rate.
Hedgehog will be indifferent as to whether it exercises the option or not.
Hedgehog will sell the option at the settlement date and combine its proceeds along with local currency units purchased at the spot rate to maximize its revenue.
Hedgehog will exercise its option and sell the proceeds of its accounts receivable collection under the provisions of the option contract at a gain.

Explicación

Pregunta 10 de 26

1

Hedgehog International has numerous foreign exchange transactions. Management has elected to hedge transactions as a means of mitigating transaction exposure to exchange rate risk. What is the most effective means that Hedgehog International can use to avoid overhedging?

Selecciona una o más de las siguientes respuestas posibles:

Hedgehog should acquire parallel loans to provide a means for liquidating unneeded hedge securities
Hedgehog should acquire the maximum amount required to hedge known and projected transactions
Hedgehog should acquire the minimum amount required to hedge known transactions.
Hedgehog should enter into a cross hedging agreement.

Explicación

Pregunta 11 de 26

1

An American importer expects to pay a British supplier 500,000 British pounds in three months. Which of the following hedges is best for the importer to fix the price in dollars?

Selecciona una o más de las siguientes respuestas posibles:

Selling British pound call options.
Buying British pound put options
Buying British pound call options.
Selling British pound put options.

Explicación

Pregunta 12 de 26

1

Platinum Co. has a receivable due in 30 days for 30,000 euros. The treasurer is concerned that the value of the euro relative to the dollar will drop before the payment is received. What should Platinum do to reduce this risk?

Selecciona una o más de las siguientes respuestas posibles:

Enter into a forward contract to sell 30,000 euros in 30 days
Buy 30,000 euros now.
Platinum cannot effectively reduce this risk
Enter into an interest rate swap contract for 30 days.

Explicación

Pregunta 13 de 26

1

In evaluating the impact of relative inflation rates on the demand for a foreign currency, which of the following is true?

Selecciona una o más de las siguientes respuestas posibles:

As inflation associated with a foreign economy increases in relation to a domestic economy, demand for the foreign currency falls.
As inflation associated with a foreign economy decreases in relation to a domestic economy, demand for the foreign currency falls.
As inflation associated with a foreign economy increases in relation to a domestic economy, demand for the foreign currency increases.
Inflation is irrelevant to currency demand.

Explicación

Pregunta 14 de 26

1

In evaluating the impact of relative inflation rates on the demand for a foreign currency, which of the following is true?

Selecciona una o más de las siguientes respuestas posibles:

As inflation associated with a foreign economy increases in relation to a domestic economy, demand for the foreign currency falls.
As inflation associated with a foreign economy decreases in relation to a domestic economy, demand for the foreign currency falls.
As inflation associated with a foreign economy increases in relation to a domestic economy, demand for the foreign currency increases
Inflation is irrelevant to currency demand

Explicación

Pregunta 15 de 26

1

Atlas Worldwide Industries conducts business in a number of different countries and is trying to evaluate its economic exposure to exchange rate risk. Which of the following statements is not correct?

Selecciona una o más de las siguientes respuestas posibles:

Atlas will suffer an economic loss in the event it has net cash outflows of a foreign currency and the foreign currency appreciates
Atlas will suffer an economic loss in the event it has net cash inflows of a foreign currency and the foreign currency appreciates.
Atlas will enjoy an economic gain in the event it has net cash outflows of a foreign currency and the foreign currency depreciates
Atlas will suffer an economic loss in the event it has net cash inflows of a foreign currency and the foreign currency depreciates.

Explicación

Pregunta 16 de 26

1

Universal Industries limits its operations to exports to foreign countries. What can be said about Universal's exposures to exchange rate risk?

Selecciona una o más de las siguientes respuestas posibles:

Universal is subject to transaction and translation exposures to exchange rate risk.
Universal is subject to economic and translation exposures to exchange rate risk.
Universal is subject to potential transaction, economic and translation exposures to exchange rate risk.
Universal is subject to potential transaction and economic exposures to exchange rate risk.

Explicación

Pregunta 17 de 26

1

What is the effect when a foreign competitor's currency becomes weaker compared to the U.S. dollar?

Selecciona una o más de las siguientes respuestas posibles:

The fluctuation in the foreign currency's exchange rate has no effect on the U.S. company's sales or cost of goods sold.
The foreign company will be disadvantaged in the U.S. market.
It is better for the U.S. company when the value of the U.S. dollar strengthens.
The foreign company will have an advantage in the U.S. market.

Explicación

Pregunta 18 de 26

1

Freely fluctuating exchange rates perform which of the following functions?

Selecciona una o más de las siguientes respuestas posibles:

They make imports cheaper and exports more expensive.
They automatically correct a lack of equilibrium in the balance of payments.
They impose constraints on the domestic economy.
They eliminate the need for foreign currency hedging.

Explicación

Pregunta 19 de 26

1

If the dollar price of the euro rises, which of the following will occur?

Selecciona una o más de las siguientes respuestas posibles:

The dollar depreciates against the euro.
The euro will buy fewer U.S. goods
The euro depreciates against the dollar
The euro will buy fewer European goods.

Explicación

Pregunta 20 de 26

1

Which of the following types of risk can be reduced by diversification?

Selecciona una o más de las siguientes respuestas posibles:

Recessions.
High interest rates
Labor strikes.
Inflation.

Explicación

Pregunta 21 de 26

1

Which of the following factors is inherent in a firm's operations if it utilizes only equity financing?

Selecciona una o más de las siguientes respuestas posibles:

Marginal risk.
Interest rate risk.
Business risk.
Financial risk.

Explicación

Pregunta 22 de 26

1

The required rate of return is generally computed as the risk-free rate of return plus a number of risk premium adjustments. All of the following risk adjustments are used to compute the required rate of return, except:

Selecciona una o más de las siguientes respuestas posibles:

Purchasing power risk premium.
Credit risk premium
Default risk premium.
Maturity risk premium.

Explicación

Pregunta 23 de 26

1

Each of the following financial instruments is a derivative, except:

Selecciona una o más de las siguientes respuestas posibles:

Interest rate futures.
A fixed interest, five-year note payable
A contract to purchase a commodity in six months at a price determined today
An agreement to buy a piece of equipment in six months at a price determined today

Explicación

Pregunta 24 de 26

1

A put is an option that gives its owner the right to do which of the following?

Selecciona una o más de las siguientes respuestas posibles:

Sell a specific security at fixed conditions of price and time.
Buy a specific security at a fixed price for an indefinite time period.
Buy a specific security at fixed conditions of price and time.
Sell a specific security at a fixed price for an indefinite time period.

Explicación

Pregunta 25 de 26

1

A company has several long-term floating-rate bonds outstanding. The company's cash flows have stabilized, and the company is considering hedging interest rate risk. Which of the following derivative instruments is recommended for this purpose?

Selecciona una o más de las siguientes respuestas posibles:

Futures contract on a stock.
Interest rate swap agreement
Structured short-term note.
Forward contract on a commodity.

Explicación

Pregunta 26 de 26

1

Which tool would most likely be used to determine the best course of action under conditions of uncertainty?

Selecciona una o más de las siguientes respuestas posibles:

Scattergraph method.
Expected value (EV).
Cost-volume-profit analysis
Program evaluation and review technique (PERT).

	Creado por Harpratap Singh hace más de 9 años

Financial Decisions Part 1, part 2

B 6- Financial Decisions, Financial Risk Managment

B 6- Financial Decisions, Financial Risk Managment

Pregunta 1 de 26

What would be the primary reason for a company to agree to a debt covenant limiting the percentage of its long-term debt?

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 2 de 26

Bander Co. is determining how to finance some long-term projects. Bander has decided it prefers the benefits of no fixed charges, no fixed maturity date and an increase in the credit-worthiness of the company. Which of the following would best meet Bander's financing requirements?

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 3 de 26

Which of the following types of bonds is most likely to maintain a constant market value?

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 4 de 26

Managers that anticipate greater return for greater risk are referred to as having what attitude toward risk?

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 5 de 26

If an investor's certainty equivalent is greater than the expected value of an investment alternative, the investor is said to be:

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 6 de 26

Investment managers develop portfolios of different investments to combine, offset, and thereby reduce overall risk. Not all risks can be eliminated by development of a portfolio. Risks that cannot be eliminated through a portfolio are called:

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 7 de 26

The marketable securities with the least amount of default risk are:

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 8 de 26

When purchasing temporary investments, which one of the following best describes the risk associated with the ability to sell the investment in a short period of time without significant price concessions?

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 9 de 26

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 10 de 26

Hedgehog International has numerous foreign exchange transactions. Management has elected to hedge transactions as a means of mitigating transaction exposure to exchange rate risk. What is the most effective means that Hedgehog International can use to avoid overhedging?

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 11 de 26

An American importer expects to pay a British supplier 500,000 British pounds in three months. Which of the following hedges is best for the importer to fix the price in dollars?

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 12 de 26

Platinum Co. has a receivable due in 30 days for 30,000 euros. The treasurer is concerned that the value of the euro relative to the dollar will drop before the payment is received. What should Platinum do to reduce this risk?

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 13 de 26

In evaluating the impact of relative inflation rates on the demand for a foreign currency, which of the following is true?

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 14 de 26

In evaluating the impact of relative inflation rates on the demand for a foreign currency, which of the following is true?

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 15 de 26

Atlas Worldwide Industries conducts business in a number of different countries and is trying to evaluate its economic exposure to exchange rate risk. Which of the following statements is not correct?

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 16 de 26

Universal Industries limits its operations to exports to foreign countries. What can be said about Universal's exposures to exchange rate risk?

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 17 de 26

What is the effect when a foreign competitor's currency becomes weaker compared to the U.S. dollar?

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 18 de 26

Freely fluctuating exchange rates perform which of the following functions?

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 19 de 26

If the dollar price of the euro rises, which of the following will occur?

Selecciona una o más de las siguientes respuestas posibles:

Explicación

Pregunta 20 de 26

Which of the following types of risk can be reduced by diversification?