Quiz Ch 24 – T/F Hedging Impact on Debt Capacity
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
True or false: Hedging could enhance a company’s debt capacity.
True or false: Hedging could enhance a company’s debt capacity.
True or false: When a company hedges, it essentially transfers the risk to another individual.
True or false: In a standard interest rate swap, two parties exchange fixed payments for payments linked to the interest rate level.
True or false: The question of whether companies should always leave investors to hedge for themselves is subjective.
True or false: Margin is required from both the seller and buyer in a futures contract.
True or false: Mark-to-market applies to forward contracts.
True or false: Mexico acquired call options to secure the price of its oil, establishing a base floor for its revenue stream.
True or false: To safeguard against declining oil prices, an oil producer would sell, rather than buy, crude oil futures.
True or false: Employing options to mitigate downside risk is referred to as a “protective put” strategy.
True or false: Through options, a company can safeguard against rising raw material prices at a cost, while still enjoying the advantages of price decreases.