REVIEW QUESTIONS
REVIEW HINTS MANAGING FINANCIAL RISK (FMR) AND
THE FASB’S SUMMARY OF DERIVATIVES TYPES
(Both Readings Cover the Same Topics)
CHAPTER 1
1. Financial risk is:
2. Interest-rate risk refers to:
3. Short-term interest rates:
4. The prices of long-term bonds:
5. Duration is:
6. The term structure of interest rates describes the relationship between the:
7. According to the expectations theory of the yield curve, a downward sloping yield curve means that market participants expect:
8. The term structure theory which predicts long-term interest rates will, on average, be higher than short-term interest rates is called:
9. The goal of financial engineering is to:
10. A major purpose of financial risk management is to:
CHAPTER 2
1. The forward exchange rate locked in with a forward exchange-rate contract:
2. The Eurocurrency market is:
3. The U.S. dollar forward exchange rate premium or discount on the British pound sterling is most likely to be equal to:
4. A forward exchange contract to buy German marks in 60 days can be replicated by:
5. A forward rate agreement is:
6. The contractual rate on a Norwegian FRA can be derived from:
7. With a forward exchange-rate contract, payment must be made:
CHAPTER 3
1. The settlement price of a futures contract is:
2. The process of marking futures contracts to market has the effect of:
3. Marking to market is generally thought to:
4. Price limits are most likely to be associated with:
5. Foreign-currency contracts are likely to be used to:
6. A person wanting to lock in an exchange rate for the payment of a foreign-currency obligation to someone else would:
7. Basis in futures-contract trading refers to:
8. A basic relationship in financial futures pricing is that:
CHAPTER 4
1. An option contract gives the option holder:
2. An option to sell an asset is called:
3. An option to by an asset is called:
4. A European option:
5. A call option can be replicated by:
CHAPTER 5
1. A major advantage of options over futures contracts for hedging purposes is:
2. Foreign-currency options are available:
3. An expected receipt of German marks by an American exporter can be hedged best by:
4. Using foreign-currency futures options instead of underlying foreign-currency futures contracts:
5. The writers of currency call options:
6. To set a cap on the interest rate that a company must pay for a future loan, the treasurer can:
7. The interest-rate cap that a corporate treasurer can set on a future loan is equal to the rate implied by the strike price of an interest-rate:
8. The value of an interest-rate call option will increase if:
9. The option delta is:
CHAPTER 6
1. An interest rate swap usually involves:
2. Usually, interest rate swaps are:
3. In an interest rate swap, the firm wishing floating-rate debt:
4. In an interest rate swap:
5. An interest rate swap is:
6. Swaptions are:
7. One reason interest rate swaps exist is that:
8. A currency swap is:
9. Circus swaps are:
10. In efficient markets, the value of an outstanding interest rate swap:
CHAPTER 7
1. An expected receipt of British pounds in ninety days can be fully hedged:
2. If a company uses a forward contract to fully hedge a required payment of yen in ninety days:
3. A risk management product which is similar to a cylinder is:
4. A corporate treasurer could set a cap and a floor on the interest rate for a future loan by:
5. A bank could set a cap and a floor on the interest rate it receives from a commercial loan by:
6. A corporate treasurer could convert a floating-rate loan to a synthetic fixed-rate loan by:
7. If interest rates are expected to rise:
From the FASB document entitled Summary of Derivative Types at
J:\courses\acct5341\fasb\sfas133\derivsum.doc
Be prepared for essay questions about the following:
1. Determination of Fair Value pp. 4-7
2. What is duration and why is it important? pp. 11-17
3. How are forward rates derived? pp. 19-20
4. How are yield curves derived? pp. 19-27
5. What are the types of risks in derivatives? pp. 75-76
6. Glossary terms pp. 77-81
Sometimes I ask students to provide the FAS 133 journal entries for examples given in he FASB document entitled Summary of Derivative Types at
J:\courses\acct5341\fasb\sfas133\derivsum.doc
All Possible Quiz Questions for each week are topics for examination questions.
................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.
Related searches
- performance review questions and answers
- employee review questions for managers
- performance review questions for managers
- annual review questions for managers
- chapter 3 review questions answers
- chapter 2 review questions and answers
- performance review questions examples
- openstax psychology review questions answers
- annual review questions and answers
- peer review questions to ask
- self review questions and answers
- employee review questions for employee