Exam 25: Derivatives and Hedging Risk
Exam 1: Introduction to Corporate Finance63 Questions
Exam 2: Financial Statements and Cash Flow91 Questions
Exam 3: Financial Statements Analysis and Long-Term Planning116 Questions
Exam 4: Discounted Cash Flow Valuation129 Questions
Exam 5: Net Present Value and Other Investment Rules97 Questions
Exam 6: Making Capital Investment Decisions89 Questions
Exam 7: Risk Analysis, Real Options, and Capital Budgeting90 Questions
Exam 8: Interest Rates and Bond Valuation63 Questions
Exam 9: Stock Valuation68 Questions
Exam 10: Risk and Return: Lessons From Market History76 Questions
Exam 11: Return and Risk: the Capital Asset Pricing Model127 Questions
Exam 12: An Alternative View of Risk and Return: the Arbitrage Pricing Theory47 Questions
Exam 13: Risk, Cost of Capital, and Capital Budgeting57 Questions
Exam 14: Efficient Capital Markets and Behavioral Challenges62 Questions
Exam 15: Long-Term Financing: an Introduction49 Questions
Exam 16: Capital Structure: Basic Concepts86 Questions
Exam 17: Capital Structure: Limits to the Use of Debt69 Questions
Exam 18: Valuation and Capital Budgeting for the Levered Firm51 Questions
Exam 19: Dividends and Other Payouts86 Questions
Exam 20: Issuing Securities to the Public71 Questions
Exam 21: Leasing50 Questions
Exam 22: Options and Corporate Finance87 Questions
Exam 23: Options and Corporate Finance: Extensions and Applications40 Questions
Exam 24: Warrants and Convertibles54 Questions
Exam 25: Derivatives and Hedging Risk62 Questions
Exam 26: Short-Term Finance and Planning123 Questions
Exam 27: Cash Management55 Questions
Exam 28: Credit and Inventory Management53 Questions
Exam 29: Mergers and Acquisitions83 Questions
Exam 30: Financial Distress47 Questions
Exam 31: International Corporate Finance95 Questions
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Futures market transactions are used to reduce risk.Risk may not be totally offset if:
Free
(Multiple Choice)
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Correct Answer:
E
Comparing long-term bonds with short-term bonds, long-term bonds are _____ volatile and therefore experience _____ price change than short-term bonds for the same interest rate shift.
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(Multiple Choice)
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Correct Answer:
C
A mortgage banker had made loan commitments for $10 million in 3 months.How many contracts on Treasury bonds futures must the banker write or buy?
Free
(Multiple Choice)
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Correct Answer:
B
Derivatives can be used to either hedge or speculate.These actions:
(Multiple Choice)
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A miller who needs wheat to mill to flour uses the futures market to protect a profit by:
(Multiple Choice)
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A futures contract on gold states that buyers and sellers agree to make or take delivery of an ounce of gold for $400 per ounce.The contract expires in 3 months.The current price of gold is $400 per ounce.If the price of gold rises and continues to rise every day over the 3 month period, then when the contract is settled, the buyer will _____ and the seller will _____.
(Multiple Choice)
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Which of the following terms is not part of a forward contract?
(Multiple Choice)
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An inverse floater and a super-inverse floater are more valuable to a purchaser if:
(Multiple Choice)
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Assets Duration Market Value Overnight Money 0.0 \3 Million 1-year T-Bonds 0.6 \ 8 Million Loans 2.20 \ 20 Million Mortgages 7.50 \ 8 Million Liabilities Duration Market Value Checking Accounts 0.0 \ 20 Million Short-term CD's 0.4 \ 4 Million Long-term CD's 3.20 \ 12 Million Equity \3 Million
-What new asset duration will immunize the balance sheet?
(Essay)
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The main difference between a forward contract and a cash transaction is:
(Multiple Choice)
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Duration is defined as the weighted average time to maturity of a financial instrument.Explain how this knowledge can help protect against interest rate risk.
(Essay)
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Interest rate and currency swaps allow one party to exchange a:
(Multiple Choice)
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You hold a forward contract to take delivery of U.S.Treasury bonds in 9 months.If the entire term structure of interest rates shifts down over the 9-month period, the value of the forward contract will have _____ on the date of delivery.
(Multiple Choice)
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A set of bonds all have the same maturity.Which one has the least percentage price change for given shifts in interest rates:
(Multiple Choice)
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Exotic derivatives are complicated blends of other derivatives.Some exotics are:
(Multiple Choice)
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Calculate the duration of a 7-year $1,000 zero-coupon bond with a current price of $399.63 and a yield to maturity of 14%.
(Multiple Choice)
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