1--A Cash flow hedge differs from a fair value hedge because a cash flow hedge

a. defers the gains or losses in the value of the derivative using Other Comprehensive Income.

b. cannot be used for firm purchase or sales commitments.

c.records gains or losses in the value of the derivative directly to earnings of the company.

d.is not recorded unless it is a highly effective hedge

2--Coke uses derivatives as a risk management tool. Which of the following is NOT a primary market risk managed by Coke through the use of derivatives and nonderivatives financial instruments:

a.Interest rate risk

b.Foreign currency exchange rate risk

c.Commodity price risk .

d.Stock price risk

3--

A forward contract used as a cash flow hedge will be recorded as an asset if

a.The holder is expecting to make a payment as a result of the contract

b.The holder is hedging the net investment in a foreign entity.

c.The holder is using an alternate accounting method and deferring all gains or losses from the hedge

d.The holder is expecting to receive a payment as a result of the contract.

3--A direct quote for the Canadian dollar is given at $1.28 per 1 US- foreign currency The respective indirect quote for the Canadian dollar would be reported as

a. 1.00 US = $ 1.28 CD

b-1.28 CD = $ .78125 US

c.1.28 CD=$ 1.00 US

d..78125 US =$1 CD

4--If a sale on account by a U.S. company is made with a foreign company, and the U.S. company has foreign currency risk, then

a.the U.S. company has denominated the transaction in US dollars.

b-the foreign company has denominated the transaction in their own currency.

c.the U.S. company has measured the transaction in US dollars.

d.the foreign company has measured the transaction in their own currency.

5--The purchase price of an option contract is typically recorded as

a.A component of shareholders equity

b.An expense

c.An asset

d.A liability