Hi,

Below MCQs (1-6) are related to the following case study :

The Westfield Machine Tool and Die Company (WMTC) is a US-based manufacturer of cutting tools that operates production plants in the United States and Spain. WMTC's CEO has received an economic report forecasting that interest rates in the future will likely increase worldwide. He has asked WMTC's CFO, Yolanda Lopez, to examine ways by which different kinds of swaps could be used as a means of reducing the company's interest rate and currency risks.

Lopez has identified the following areas where swaps might be an attractive tool for managing risk:

• WMTC's employee pension plan portfolio
• WMTC's existing five-year bank loan
• Foreign exchange risk associated with cash flows repatriated from the operations in Spain
• New debt issue associated with upcoming expansion projects

Information regarding WMTC's pension plan portfolio is shown in Exhibit 1. Within the WMTC pension plan portfolio, the allocation within equities is heavily weighted towards the company's own stock. WMTC would like to retain these shares for corporate control purposes.