Question 1:

The future market helps the overall economy by:

a) Allowing companies to hedge against foreign exchange risk

b) help controlling demand pull inflation,by allowing businesses to stable pricing

c) Helping firms manage their credit risk

d) none of the above.

Question 2:

Games of Bones is a local business that manufactures of board games. They sell their product in Canadian Dollars.A lot of the raw materials are purchased from India in rupees. When hedging their risk with the bank, Game of Bones should take the following position with the bank.

a) The short position in Indian Rupee

b) The long position in Canadian Dollars

c) Both A &B

d) Neither A or B

Question 3:

Suppose that you work for a company that uses $2Million in raw sugar as part of their product. Sugar as a cost accounts for less than 0.05% of the company's revenue. You believe that this the company should hedge this risk but the CFO does not share your view. His response to the risk is, $2Mis fairly small and immaterialto the company's bottom line. Furthermore he tells you that the price of raw sugar has stayed the same for ten years so there is nothing to worry about. The CFO is:

a) Correct in that though the company uses a lot of sugar, fluctuations in sugar pricing will not impact the company's bottom line materially.

b) Correct in that the price of sugar doesn't really change. Only commodities that are volatile should be hedged against.

c) The CFO is incorrect,all financial risks regardless of materiality should be hedged against. Materiality is an accounting term not finance.

d) The CFO is correct about both a &b.

Question 4:

Zakiis interested in buying put options because he believes that systematic factors will result in substantial decrease in stock prices. To maximize his profit he should:

a) use the futures market instead of options

b) buy put options in stocks that are most effected by the COVID 19

c) Its indifferent to what put options he buys,he will make the same amount of money because the stocks will decrease the same %

d) Buy put options in the most volatile stocks

Question 5:

Ahmed and Farooqare interested in purchasing call options of a stock they think will increase in value. Ahmed and Farooq can be best classified as:

a) Market traders

b) Speculators

c) Investors

d) Stock Brokers

Question 6:

If the share price rises substantially above the conversion price, an advantage to the corporation would be:

a) the bond would most likely be converted into common shares and the debt would not have to be repaid.

b) The premium will rise thus resulting in higher profit

c) the floor price would offer the investor downside protection.

d) There is no advantage as the debt holders would convert resulting in buyers of equity at a lower stock price,and reducing the overall firm value.

Question 7:

Tammy's cold cuts makes is a local producer of Turkey sausage and hotdogs. All of her business is transacted using cash in Canadian dollars, product is only ordered and prepared on demand at custom pricing. Tammyhas never had to borrow funds from a bank for her business. What financial risks impact her business?

a) the only risk is the commodity risk on raw materials mainly Turkey meat

b) Inflation in the Canadian market resulting in lower margins

c) Commodity,Credit and Foreign Exchange Risk

d) None of the above.

Question 8:

The initial margin in the futures market helps the market in that

a) Credit risk is eliminated

b) Participants are able to hedge their risks with minimal cash flow

c) Helps standardize all the transactions in the market

d) All of the above.

Question 9:

Sanjeevis short selling stock ABC company. He wants to use the options market to help reduce his risk. He should

a) Write put options for the ABC company Stock

b) Buy Put options for the ABC Company stock

c) Write call options for the ABC Stock

d) None of the above result in hedging his risk.