Use of financial derivatives contract

Problem 1: Total corporate risk includes systemic but not systemic risk.

a.  True
b.  False

Problem 2: Hedging is the use of financial derivatives contract to protect against unexpected rate changes movements.

a. True
b. false

Problem 3: International Company, an American company, wants to borrow money for its expansion in Australia. Recommend an optimal financing strategy for International Company in order to minimize currency volatility in repaying the loan:

a Borrow locally
b Borrow in the Euro market
c Borrow in America
d Borrow in Latin America
e Borrow in Asia

Problem 4: Parity conditions in economic relationships should apply to

a spot rates
b inflation rates
c interest rates
d all of the above

Problem 5: Which of the following short-term management techniques can be used to make a foreign investment decision:

a cash budgeting
b lockbox
c inflation
d deflation
e depreciation

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Finance Basics: Use of financial derivatives contract
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