公司理财原版题库Chap025

Ross/Westerfield/Jaffe,CorporateFinance,Ross/Westerfield/Jaffe,CorporateFinance,7/ePAGE309PAGE308PAGE308TestBank,Chapter25Chapter25DerivativesandHedgingRiskMultipleChoiceQuestionsAderivativeisafinancialinstrumentwhosevalueisdeterminedbyregulatorybodysuchastheFTC.aprimitiveorunderlyingasset.hedgingariskhedgingaspeculation.Noneoftheabove.Answer:B Page:Derivativescanbeusedtoeitherhedgeorspeculate.Theseactionsincreaseriskinbothcases.decreaseriskinbothcases.spreadorminimizeriskinbothcases.offsetsriskbyhedgingandincreaseriskbyspeculating.offsetrisksbyspeculatingandincreaseriskbyhedging.Answer:D Difficulty:Medium Page:697Aforwardcontractisdescribedbyagreeingtodaytobuyaproductatalaterdateatapricetobesetinthefuture.agreeingtodaytobuyaproducttodayatitscurrentprice.agreeingtodaytobuyaproductatalaterdateatapricesettoday.agreeingtodaytobuyaproductifandonlyifitspricerisesabovetheexercisepricetodayatcurrentpriceNoneoftheabove.Answer:C Difficulty:Easy Page:697Thebuyerofaforwardcontractwillbetakingdeliveryofthegood(s)todayattoday'sprice.willbemakingdeliveryofthegood(s)atalaterdateatthatdate'sprice.willbemakingdeliveryofthegood(s)todayattoday'sprice.willbetakingdeliveryofthegood(s)atalaterdateatpre-specifiedprice.BothAorD.Answer:D Difficulty:Medium Page:697Themaindifferencebetweenaforwardcontractandacashtransactionisonlythecashtransactioncreatesanobligationtoperform.aforwardisperformedatalaterdatewhilethecashtransactionisperformedimmediately.onlyoneinvolvesadeliverableinstrument.neitherallowsforhedging.Noneoftheabove.Answer:B Difficulty:Medium Page:698Futurescontractscontrastwithforwardcontractsbytradingonanorganizedexchange.markingtothemarketonadailybasis.allowingthesellertodeliveranydayoverthedeliverymonth.Alloftheabove.Noneoftheabove.Answer:D Difficulty:Easy Page:699Youhavetakenashortpositioninafuturescontractoncornat$2.60perbushel.Overthenext5daysthecontractsettledat2.52,2.57,2.62,2.68,2.70.Youthendecidetoreverseyourpositioninthefuturesmarketonthefifthdayatclose.Whatisthenetamountyoureceiveattheendof5A) $0.00B) $2.60C) $2.70D) $2.80E) MustknowthenumberofcontractsAnswer:B Difficulty:Medium Page:Rationale:Contractnetstoyoutheoriginalprice.Thenetpositionisbasedondailymarkingtothemarket.Thenetchangeis$CloseChange=$2.70-$.10=$2.60Youhavetakenashortpositioninafuturescontractoncornat$2.60perbushel.Overthenext5daysthecontractsettledat2.52,2.57,2.62,2.68,2.70.Beforeyoucanreverseyourpositioninfuturesmarketonthefifthdayyouarenotifiedtoacceptdelivery.Whatwillyoureceiveondeliveryandwhatisthenetamountyoureceiveintotal?A) $2.60;$-0.10B) $2.60;$0.10C) $2.60;$2.70D) $2.70;$-0.10E) $2.70;$2.60Answer:E Difficulty:Medium Page:Rationale:Deliveryismadeatthesettlepriceof$2.70.Thenetpositionisbasedondailymarkingtothemarket.Thedifferenceof-.10=(.08+-.05+-.05+-.06+-.02),whichisalossversusthelastsettleprice.Ifyouboughtafuturescontractfor$2.60perbushelandthecontractendedat$2.70afterseveraldaysoftradingof$2.52,$2.57,$2.62,$2.68,and$2.70.Whatwouldthemarktomarketsequencebe?A) -.08,.05,.05,.06,.02B) .08,-.05,-.05,-.06,-.02C) .08,.03,-.02,-.06,-.10D) -.08,-.03,.02,.06,.10E) .10Answer:A Difficulty:Medium Page:Rationale:Dailymarkingtothemarketfrompriordaysettle.($2.52$2.60;$2.57$2.52;$2.62$2.57;$2.68$2.62;$2.70$2.68)=($-.08;$.05;$.05;$.06;$.02)Supposeyouagreetopurchaseone-ounceofgoldfor$382anytimeoverthenextmonth.currentpriceofgoldis$380.Thespotpriceofgoldthenfallsto$377thenextday.Iftheagreementisrepresentedbyafuturescontractmarkingtomarketonadailybasisasthepricechanges,whatisyourcashflowattheendofthebusinessonthenextday?$0$3$5D) $-3E) $-5Answer:D Difficulty:Medium Page:Rationale:FuturesPosition=Spot=$377-$380=$-3OnMarch1,youcontracttotakedeliveryof1ounceofgoldfor$415.TheagreementisgoodforanydayuptoApril1.ThroughoutMarch,thepriceofgoldhitalowof$385andhitahighofThepricesettledonMarch31at$420,andonApril1styousettleyourfuturesagreementatthatprice.YournetcashflowisA) $-30.B) $-20.C) $-15.D) $5.E) $20.Answer:D Difficulty:Medium Page:Rationale:NCF=$420-$415=$5Afuturescontractongoldstatesthatbuyersandsellersagreetomakeortakedeliveryofofgoldfor$400perounce.Thecontractexpiresin3months.Thecurrentpriceofgoldiounce.Ifthepriceofgoldrisesandcontinuestoriseeverydayoverthe3monthperiod,thecontractissettled,thebuyerwillandthesellerwill.lose;gaingain;losegain;breakevengain;gainlose;loseAnswer:B Difficulty:Easy Page:698-701Apotentialdisadvantageofforwardcontractsversusfuturescontractsistheextraliquidityrequiredtocoverthepotentialoutflowsthatoccurpriortodelivercausedbymarkingtomarket.theincentiveforaparticularpartytodefault.thatthebuyersandsellersdon'tknoweachotherandnevermeet.D)Alloftheabove.E)BothAandC.Answer:BDifficulty:EasyPage:701Afarmerwithwheatinthefieldsandwhousesthefuturesmarkettoprotectaprofitisanofalonghedge.ashorthedge.sellingfuturestoguardagainstapotentialloss.BothAandC.BothBandC.Answer:E Difficulty:Medium Page:703-704Amillerwhoneedswheattomilltoflourusesthefuturesmarkettoprotectaprofitbyalonghedgetotakedelivery.ashorthedgetodeliver.buyingfuturestoguardagainstapotentialloss.BothAandC.BothBandC.Answer:D Difficulty:Medium Page:705Achocolatecompanywhichusesthefuturesmarkettolockinthepriceofcocoatoprotectisanexampleofalonghedge.ashorthedge.purchasingfuturestoguardagainstapotentialloss.D)BothAandC.E)BothBandC.Answer:D Difficulty:Medium Page:705Iftheproducerofaproducthasenteredintoafixedpricesaleagreementforthatoutput,producerfacesanicesteadyprofitbecausetheoutputpriceisfixed.anuncertainprofitiftheinputpricesarevolatile.Thisriskcanbereducedbyashorthedge.anuncertainprofitiftheinputpricesarevolatile.Thisriskcanbereducedbyalonghedge.amodestprofitiftheinputpricesarestable.Thisriskcanbereducedbyalonghedge.amodestprofitiftheinputpricesarestable.ThisriskcanbereducedbyashortAnswer:C Difficulty:Medium Page:705YouholdaforwardcontracttotakedeliveryofU.S.Treasurybondsin9months.Iftheentirestructureofinterestratesshiftsdownoverthe9-monthperiod,thevalueoftheforwardcontractwillhave onthedateofdelivery.risenfallennotchangedeitherrisenorfallen,dependingonthematurityoftheT-bondcollapsedAnswer:A Difficulty:Medium Page:708MRGM'sfailureinhedgingtheirforwardpositionforoildeliverywascontributedtobyamismatchbetweenmaturityoftheforwardandthefutures.theentiretermstructureofoilpricesnotmovingtogether.contractsettlementsoccurringatdifferentdatescausingliquidityproblems.Alloftheabove.Noneoftheabove.Answer:D Difficulty:Hard Page:705-706Twokeyfeaturesoffuturescontractsthatmakethemmoreindemandthanforwardcontractsarefuturesaretradedonexchangesandmustbemarkedtothemarket.futurescontractsallowflexibilityindeliverydatesandprovidealiquidmarketfornettingpositions.futuresaremarkedtothemarketandallowdeliveryflexibility.futuresaretradedinliquidmarketsandaremarkedtothemarket.Noneoftheabove.Answer:B Difficulty:Medium Page:699Ifratesinthemarketfallbetweennowandonemonthfromnow,themortgagebankerlosesasthemortgagesaresoldatadiscount.gainsasthemortgagesaresoldatadiscount.losesasthemortgagesaresoldatapremium.gainsasthemortgagesaresoldatapremium.neithergainsnorloses.Answer:D Difficulty:Hard Page:709-710Toprotectagainstinterestraterisk,themortgagebankershouldbuyfutures,asthispositionwillhedgelosesifratesrise.sellfutures,asthispositionwillhedgelossesifratesrise.sellfutures,asthispositionwilladdtohisgainsifratesrise.buyfutures,asthispositionwilladdtohisgainsifratesrise.Noneoftheabove.Answer:B Difficulty:Hard Page:710Abankhasa$50millionmortgagebondriskpositionwhichithedgesintheTreasurybondfuturesmarketsattheChicagoBoardofTrade.Approximatelyhowmanycontractsareneededtobeheldinthehedge?550C) 500D) 5000E) 50000Answer:C Difficulty:Easy Page:Rationale:PortfolioValue/TBandContractValue=$50,000,000/$100,000=500Amortgagebankerhadmadeloancommitmentsfor$10millionin3months.HowmanycontractsonTreasurybondsfuturesmustthebankerwriteorbuy?Goshort10.Goshort100.Golong10.Golong100.Noneoftheabove.Answer:B Difficulty:Medium Page:710-711Rationale:Mustwrite/goshort=$10,000,000/$100,000=100Futuresmarkettransactionsareusedtoreducerisk.Riskmaynotbetotallyoffsetifthetwoinstrumentshavedifferentmaturities.payoffschedulesofthetwoinstrumentsaredifferent.thevolatilityofthetwoinstrumentsaredifferent.thepricemovementsarenotperfectlycorrelated.Alloftheabove.Answer:E Difficulty:Easy Page:711-712Hedginginthefuturesmarketscanreduceallriskifpricemovementsinboththecashandfuturesmarketsareperfectlycorrelated.pricemovementsinboththecashandfuturesmarketshavezerocorrelation.pricemovementsinboththecashandfuturesmarketsarelessthanperfectlycorrelated.thehedgeisashorthedge,butnotalonghedge.thehedgeisalonghedge,butnotashortAnswer:A Difficulty:Medium Page:712Comparinglong-termbondswithshort-termbonds,long-termbondsare volatileandthereforeexperience pricechangecomparedwithshort-termbondsforthesameinterestrateshift.less;lessless;moremore;moremore;lessmore;thesameAnswer:C Difficulty:Medium Page:711Wheninterestratesshift,thepriceofzerocouponbondsaremorevolatileascomparedwithshort-termbondsofthesamematurity.arelessvolatileascomparedwithshort-termbondsofthesamematurity.aremorevolatileascomparedwithlong-termbondsofthesamematurity.arelessvolatileascomparedwithlong-termbondsofthesamematurity.BothAandC.Answer:E Difficulty:Medium Page:714Durationofapurediscountbondisequaltoitshalf-life.islessthanazerocouponbond.isequaltotheliabilitieshedged.equaltoitsmaturity.Noneoftheabove.Answer:D Difficulty:Medium Page:715Inpercentageterms,highercouponbondsexperiencea pricechangecomparedwithlowercouponbondsofthesamematuritygivenachangeinyieldtomaturity.greatersmallersimilarsmallerorgreaterNoneoftheabove.Answer:B Difficulty:Medium Page:717Abondmanagerwhowishestoholdthebondwiththegreatestpotentialvolatilitywouldbewiseholdshort-term,high-couponbonds.long-term,low-couponbonds.long-term,zero-couponbonds.short-term,zero-couponbonds.short-term,low-couponbonds.Answer:C Difficulty:Medium Page:716-717Thedurationofa2yearannual10%bondthatissellingforparis1.00years1.91years2.00years2.09yearsNoneoftheaboveAnswer:B Difficulty:Medium Page:Rationale:D=1[(100/1.1)]/1000+2[(1100/1.12)]/1000=.09091+1.81818=1.90909 =1.91yearsThedurationofa15yearzerocouponbondpricedat$182.70is2.74years15years17.74yearscannotdeterminewithouttheinterestrate.Noneoftheabove.Answer:B Difficulty:Easy Page:716Durationisameasureoftheyieldtomaturityofabond.couponyieldofabond.priceofabond.effectivematurityofabond.Alloftheabove.Answer:D Difficulty:Easy Page:716Asetofbondsallhavethesamematurity.Whichonehastheleastpercentagepricechangesgivenshiftsininterestrateszerocouponbonds.highcouponbonds.lowcouponbonds.purediscountbonds.notenoughinformationtodetermine.Answer:B Difficulty:Medium Page:Afinancialinstitutioncanhedgeitsinterestrateriskbymatchingthedurationofitsassetstothedurationofitsliabilities.settingthedurationofitsassetsequaltohalfthatofthedurationofitsliabilities.matchthedurationofitsassetsweightedbythemarketvalueofitsassetswiththedurationitsliabilitiesweightedbythemarketvalueofitsliabilities.settingthedurationofitsassetsweightedbythemarketvalueofitsassetstoonehalfthatofdurationoftheliabilitiesweightedbythemarketvalueoftheliabilities.Answer:C Difficulty:Medium Page:717-719Apurediscountbondpaysnocoupons,thereforeitsdurationequaltoitsmaturity.discountedcoupons,thereforeitsdurationisgreaterthanitsmaturity.levelcoupons,thereforeitsdurationisequaltoitsmaturity.decliningcoupons,thereforeitsdurationislessthanitsmaturity.Noneoftheabove.Answer:A Difficulty:Medium Page:716Durationofacouponpayingbondisequaltoitsnumberofpayments.lessthanazerocouponbond.equaltothezerocouponbond.equaltoitsmaturity.Noneoftheabove.Answer:B Difficulty:Medium Page:716-717Afinancialinstitutionhasequityequaltoone-tenthofitsassets.Ifitsassetdurationiscurrentlyequaltoitsliabilityduration,thentoimmunize,thefirmneedstodecreasethedurationofitsassets.increasethedurationofitsassets.decreasethedurationofitsliabilities.donothing,i.e.,keepthedurationofitsliabilitiesequaltothedurationofitsassets.Answer:A Difficulty:Medium Page:718-719Ifafinancialinstitutionhasequatedthedollareffectsofinterestrateriskontheassetswithdollareffectsontheliabilities,ithasengagedinalonghedge.ashorthedge.aprotectedswap.immunizinginterestraterisk.Noneoftheabove.Answer:D Difficulty:Hard Page:718ASavingsandLoanhasextremelylong-termassetsthatarecurrentlymatchedagainstextremelyshort-termliabilities.ForthisS&L,fallinginterestrateswilldecreasethevalueofitsequity.fallinginterestrateswillincreasethevalueofitsequity.risinginterestrateswillincreasethevalueofitsequity.risinginterestrateswilldecreasethevalueofitsequity.BothBandD.Answer:E Difficulty:Medium Page:719Aswapisanarrangementfortwocounterpartiestoexchangecashflowsovertime.permitfluctuationininterestrates.tohelpexchangemarketsclear.Alloftheabove.Noneoftheabove.Answer:A Difficulty:Easy Page:719FirmAispaying$750,000ininterestpaymentsayearwhileFirmBispayingLIBORplus75pointson$10,000,000loans.ThecurrentLIBORrateis6.5%.FirmAandBhaveagreedtoswapinterestpayments.Whatisthenetpaymentthisyear?FirmApays$750,000toFirmBFirmBpays$725,000toFirmAFirmBpays$25,000toFirmAFirmApays$25,000toFirmBNoneoftheabove.Answer:D Difficulty:Medium Page:Rationale:FirmApaysafixedpaymentof$750,000toBinexchangeforthefloatingpaymentof(.065+.0075)10,000,000=725,000.ThenetpositionisthatFirmApays$25,000toFirmB.Interestrateandcurrencyswapsallowonepartytoexchangeafloatinginterestrateorcurrencyvalueforafixedvalueoverthecontractterm.fixedinterestrateorcurrencyvalueforalowerfixedvalueoverthecontractterm.floatinginterestrateorcurrencyvalueforalowerfloatingvalueoverthecontractterm.afixedinterestratepositionforacurrencypositionoverthecontractterm.Noneoftheabove.Answer:A Difficulty:Hard Page:719-722LIBORstandsfor:LuasanneInterestBasisOfferedRateLibidoOverRedline.LondonInterbankOfferedRate.LondonInteragencyOvertRate.Noneoftheabove.Answer:C Difficulty:Easy Page:720Exoticderivativesarecomplicatedblendsofotherderivatives.Someexoticsareinversefloaters.capandfloors.futures.BothAandB.BothBandC.Answer:D Difficulty:Medium Page:722Aerestratesrise.ifheldforalongtime.Noneoftheabove.Answer:B Difficulty:Medium Page:722Ifafirmpurchasesacapat10%thiswilllimittheamountofborrowingto10%ofassets.paythefirm10%ontheirpurchase.willpaytheholdertheLIBORinterestabove10%.willpaytheholdertheLIBORinterestbelowthe10%.Noneoftheabove.Answer:C Difficulty:Hard Page:722Ifafirmsellsafloorat6%thiswillwillpaytheholdertheLIBORinterestbelowthe6%.paythefirm6%ontheirpurchase.willpaytheholdertheLIBORinterestabove6%.limittheamountofborrowingto6%ofassets.Noneoftheabove.Answer:A Difficulty:Hard Page:722Whichofthefollowingistrueabouttheuserofderivatives?Derivativesusuallyappearexplicitlyinthefinancialstatements.Academicsurveysaccountformuchofourknowledgeofcorporatederivativesuse.Smallerfirmsaremorelikelytousederivativesthanlargefirms.Themostfrequentlyusedderivativesarecommodityandequity.Noneoftheabovearetrue.Answer:B Difficulty:Hard Page:723Whichofthefollowingtermsisnotpartofaforwardcontract?MakingdeliveryTakingdeliveryDeliveryinstrumentCashtransactionNoneoftheabove.Answer:D Difficulty:Easy Page:697-698PAGE310PAGE310TestBank,Chapter25Ross/Westerfield/Jaffe,CorporateFinance,Ross/Westerfield/Jaffe,CorporateFinance,7/ePAGE311EssayQuestionsATreasuryNotewithamaturityof2yearspaysinterestsemi-annuallyona9percentannualcouponrate.The$1,000facevalueisreturnedatmaturity.Iftheeffectiveannualyieldformaturitiesis7percentannually,whatisthecurrentpriceoftheTreasuryNote?Difficulty:Medium Page:Answer:Thesemi-annualspotratesare(1.07.5)=P=45A3,3.44+10454,3.44PV =$1,038.99Calculatethedurationofa7-year$1,000zero-couponbondwithacurrentpriceof$399.63andyieldtomaturityof14%.Difficulty:Medium Page:Answer:Durationofazeroisalwaysequaltoitsmaturity=7years.Calculatethedurationofa4-year$1,000facevaluebond,whichpays8%couponsannuallythroughoutmaturityandhasayieldtomaturityof