Which of the following factors is inherent in a firm's operations if it utilizes only equity financing?
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1 .Each of the following is an effect from opening markets to foreign investment, except:
A A decrease in local firms' cost of capital. B A change in the volatility of emerging stock market returns. C An increase in the correlation of emerging stock markets with world markets. D A decrease in investment growth rates.
2 .If an investor's certainty equivalent is greater than the expected value of an investment alternative, the investor is said to be:
A Risk seeking. B Risk averse. C Risk indifferent. D Cautious.
3 .Hedgehog International owes 500,000 local currency units to its foreign supplier in 90 days. The current spot rate of the local currency unit is US60. Hedgehog purchases a call option to buy the local currency unit in 90 days for USD.61 for a premium of USD.005. The exchange rate for the local currency increases to USD.63 in 90 days. What will Hedgehog do on the payables' settlement date?
A Hedgehog will be indifferent as to whether it exercises the option or not. B Hedgehog will sell the option at the settlement date and use its proceeds along with local currency units purchased at the spot rate to satisfy the amount payable. C Hedgehog will not exercise the option and settle the pa...
4 .Universal Industries limits its operations to exports to foreign countries. What can be said about Universal's exposures to exchange rate risk?
A Universal is subject to transaction and translation exposures to exchange rate risk. B Universal is subject to potential transaction and economic exposures to exchange rate risk. C Universal is subject to potential transaction, economic and translation exposures to exchange rate risk. D Universal ...
5 .If a firm borrows USD500,000 at 10 percent and is required to maintain USD50,000 as a minimum compensating balance at the bank, what is the effective interest rate on the loan?
A 12.2 percent. B 11.1 percent. C 11.0 percent. D 9.1 percent.
7 .A put is an option that gives its owner the right to do which of the following?
A Sell a specific security at fixed conditions of price and time. B Buy a specific security at fixed conditions of price and time. C Buy a specific security at a fixed price for an indefinite time period. D Sell a specific security at a fixed price for an indefinite time period.
8 .Which tool would most likely be used to determine the best course of action under conditions of uncertainty?
A Cost-volume-profit analysis. B Program evaluation and review technique (PERT). C Scattergraph method. D Expected value (EV).
9 .An importing partnership has experienced a dramatic surge in its exporting business and is looking for ways to minimize its risks from foreign currency fluctuations. The partnership’s imports and exports to European Union countries are at similar levels. Which of the following methods most effectively minimizes risk?
A Conduct all foreign transactions in U.S. dollars. B Hold payables and receivables due in the same currency and amount. C Enter into an interest rate swap to mitigate the effects of exchange rate fluctuations. D Purchase futures of the currency in which the payables will be paid.
10 .A company evaluating the advantages and disadvantages ofshort-term and long-term financing options would note which of the following twocharacteristics to betrue? Short-term Financing Long-term Financing
A Increased interest rate risk； Decreased credit risk B Decreased interest rate risk； Decreased credit risk C Increased interest rate risk； Increased credit risk D Decreased interest rate risk； Increased credit risk
