3) Theeks. At pres, which onect the Farmer planted 10,000 acres in soybean this year. The weather has been perfect and the expects to harvest a record crop within the next two weeks. At present, he has no storage facilities and therefore must sell his crop as soon as it is harvested. Which one of the following risks is he facing because he must sell his crop at whatever the market price is a harvest time? A) Volatility exposure 6) - B) Transactions exposure Futures risk D) Translation exposure E) Surplus risk 6) Assume the current spot rate is Can$1.362 and the one-year forward rate is Can$1.371. for every SI The nominal risk-free rate in Canada is 6 percent while the U.S. rate is 3.5 percent. Using covered interest arbitrage you can cam an extra profit of E) $.0045 D ) 5.0120 invested over the next year. C) 5.0240 A) S.0018 B) 5.0180 7) KLM Corporation's assets are currently worth $1,487. In one year, they will be worth either $1,400 or $1,600. The risk-free interest rate is 3.5 percent. Suppose KLM has an outstanding debt issue with a face value of $1,300. What is the current value of the firm's debt? A) S1,256.04 B) S1,425.00 C) $1,376,81 D) $1.114.14 E) $1,263.19 8) 8) The expected inflation rate in Finland is 2 percent while it is 4 percent in the U.S.A risk-free asset in the U.S. is yielding 5.5 percent. What nominal rate of return should you expect on a risk-free Finnish security? A) 3.5% B) 3.0% C) 4.0% D) 2.0% E) 2.5% 9) Tandon Enterprises has expanded its operations into a new field, which is the production of everyday dinnerware. If this project goes well, the firm has the option to expand its production into fine china. What type of option is this? A) Strategic B) Call C) Put D) Intangible E) Financial