5. In general, the required rate of return equals risk-free rate plus risk premiums. Which of the following premium is not used to calculate the required rate of return? A. Inflation premium B. Credit risk premium C. Default risk premium D. Interest rate risk premium

6. A put option is a contract that: A. Gives the holder the right to buy a specific security at predetermined price for an indefinite time period B. The holder must buy a specific security at predetermined exercise price on a fixed expiration date C. Gives the holder the right to sell a specific security at predetermined exercise price on a fixed expiration date D. The holder must sell a specific security at predetermined price for an indefinite time period

7. Golden Corporation, with stabilized cash flows, has borrowed some 10-year floating-rate loans. The company is exposed to interest rate risk, and the company can mitigate this risk through: A. Futures contract on a stock B. Forward contract on a commodity C. Structured short-term note D. Interest rate swap agreement

8. Golden, a U.S.-based transportation company, has a payable of 350,000 Canadian dollars due to its distributer in 60 days. The current spot rate is $0.8. Golden entered into a call option contract with a third party to buy the Canadian dollars for $0.82 in 60 days. Golden paid a premium of $0.004. When the payable is due, the exchange rate raises to $0.84. Which of the following actions will Golden take on the settlement date? A. There is no difference between exercising the option or not B. Exercise the option, and use the proceeds from the contract to pay off the payable with a gain C. Do not exercise the option, and purchase the Canadian dollars at the spot rate to repay the payable D. Sell the option contract, and settle the payable with the proceeds from sale of contract and Canadian dollars purchased at the spot rate.