1. Which one of the following statements is true? a. Derivatives markets are used to eliminate risk from the financial system. b. Derivatives markets may be used to transfer risk from speculators to other speculators. c. Derivatives markets may be used to transfer risk from speculators to hedgers. d. Derivatives markets are used to transfer risk from exchanges to investors. 3. A firm is bidding on a construction project in Brazil. The outcome of the bid will not be known for 3 months. The firm will be paid in Reals in 6 months if they win the bid. The best way for the firm to hedge this risk over the entire time period is to a. buy Real futures. b. sell the Real forward. c. buy put options on the Real d. buy call options on the Real. 8. Firm A can borrow funds either LIBOR +0.25% floating rate or 9.5% fixed rate. Firm Bcan borrow funds either LIBOR +0.5 percent floating rate or at 8% fixed rate. If swap bank retains 0.25%, would it be possible to design an interest rate swap that would make both firms better of? What would be total savings for both firms? a. No; 1% b. Yes; 1% C. No; 1.5% d. Yes; 1.5% 27. Assets $ % 1200 % 10% 5% 0% Loans Securities Non-earning Total Liabilities Deposits Other Equity Total 3% 5% 500 300 2000 $ 1000 600 400 2000 What must net noninterest income be in order to have a 10 percent ROE, if PLL=5, and Tax=20%