Site MapHelpFeedbackFundamentals of Corporate Finance: Multiple Choice Quiz
Multiple Choice Quiz
(See related pages)



1

Interest rate risk can be hedged using a currency swap.
A)True
B)False
2

A call option is an option that gives the owner the right, but not the obligation, to buy an asset.
A)True
B)False
3

An interest rate cap is a call option on an interest rate.
A)True
B)False
4

Hedging is the process of reducing a firm's exposure to price or rate fluctuations.
A)True
B)False
5

From a historical perspective, interest rates have become more volatile in recent years but exchange rates have not.
A)True
B)False
6

Hedging is best defined as ____________.
A)eliminating the risk associated with price changes
B)using financial assets that represent a claim on other assets
C)managing short-run financial exposure due to fundamental changes in the economy
D)managing long-term financial risk due to uncertain prices or interest rates
E)reducing the exposure to price or rate fluctuations
7

Derivative securities are _______________.
A)assets that reduce exposure to price or rate fluctuations
B)assets used to reduce long-term financial risk due to fundamental changes in the economy
C)assets that reduce short-run financial exposure due to uncertain prices or interest rates
D)financial assets that represent a claim on other assets
E)securities which eliminate the risk associated with price changes
8

Transactions exposure ________________.
A)reduces exposure to price or rate fluctuations
B)includes financial assets that represent a claim on other assets
C)is short-run financial exposure due to uncertain prices or interest rates
D)is long-term financial risk due to fundamental changes in the economy
E)is exposure to brokerage fees and commissions when buying hedging instruments
9

Economic exposure ______________.
A)is also known as reducing the exposure to price or rate fluctuations
B)can be eliminated using financial assets that represent a claim on other assets
C)is short-run financial exposure due to uncertain prices or interest rates
D)is long-term financial risk due to fundamental changes in the economy
E)is exposure to short-term changes in inflation
10

A forward contract is _____________.
A)the right, but not the obligation, to purchase an asset for a specified price by a specified date in the future
B)the right, but not the obligation, to sell an asset for a specified price on or before a specified date in the future
C)a legally binding agreement to sell an asset for a specified price on a specified date
D)an agreement to exchange cash flows within the coming year
E)an agreement to sell an asset for a specified price on a specified date with gains and losses recognized daily





To learn more about the book this website supports, please visit its Information Center.
(c)2003 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.


Fundamentals of Corporate FinaOnline Learning Center with Powerweb

Home > Chapter 23 > Multiple Choice Quiz