Which of the following are examples of bankruptcy cost? (I) The cost that a financially struggling manufacturing company incurs when clients cease buying its products (II) The cost that a bank incurs when one of its clients goes bankrupt (III) The cost that a financially struggling company incurs when one of its executives resigns (IV) The cost that a manufacturing company incurs when one of its suppliers goes bankrupt (i) only (I) and (III) (I), (II), and (III) (I), (II), (III), and (IV) An outstanding loan of $2,000,000 paying 11% has been classified as non-performing. How does that affect the income statement of the issuing bank? The before-tax income would be reduced by $220,000 per year. It would not affect the income statement of the bank. The before-tax income would be reduced by $2,220,000. The before-tax income would be reduced by $2,000,000. Suppose that you work as treasurer at a US corporation and you know that in 3 months your company will be paying SAR (Saudi Reals) 2,000,000 for the purchase of lubricant oils. The spot and forward rates of USD-SAR are given below (assume that there is no bid-ask spread for simplification) If you want to hedge against currency fluctuation using forward contracts, which of the following transactions would you make? Buy a SAR 2,000,000 three-month forward contract Sell (short) a SAR 2,000,000 three-month forward contract Buy a SAR 542,000 three-month forward contract Sell (short) a SAR 542,000 three-month forward contract