Quiz Ch 26 – T/F Global Corporate Risk Management
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
True or false: The majority of the world’s largest companies employ derivatives extensively for risk management purposes.
True or false: The majority of the world’s largest companies employ derivatives extensively for risk management purposes.
True or false: The hedge ratio or delta serves as a measure of how the value of one asset responds to changes in the value of another.
True or false: Administrative costs, adverse selection, and moral hazard pose challenges for insurance companies when bearing risk.
True or false: To hedge against interest rate fluctuations, a company can choose between entering a forward rate agreement (FRA) or adopting a strategy of borrowing long-term while lending short-term.
True or false: It is common for futures contracts to undergo marking to market.
True or false: When requested to quote a rate for a one-year loan one year from today, with current interest rates at 7 percent for one year and 8 percent for two years, a bank might consider quoting 9 percent.
True or false: If asked to quote a rate for a one-year loan one year from today, a bank might suggest 7.5 percent, averaging the current rates of 7 percent for one year and 8 percent for two years.
What type of acquisition would occur if The Walt Disney Company, a highly diversified company, acquired American Airlines?
What is the term for a standardized forward contract when it is traded on an exchange?
How is goodwill created by an acquisition treated for financial statement purposes?