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Which of the following statements is true regarding derivatives contracts? a. The holder of an American-style put option has right, but not the obligation, to
Which of the following statements is true regarding derivatives contracts? a. The holder of an American-style put option has right, but not the obligation, to buy the underlying asset at the strike price on or before the expiration date. b The holder of an American-style call option has the right, but not the obligation, to sell the underlying asset at the strike price on or before the expiration date. c. The buyer in a futures contract has the right, but not the obligation, to sell the underlying asset at the strike price on or before the expiration date. d. The buyer in a futures contract has the right, but not the obligation, to buy the underlying asset at the strike price on or before the expiration date. e. None of the above Which of the following statements is true regarding corporate risk management? a. Hedging reduces the probability of bankruptcy and increases the cost of debt. b. By increasing the firm's borrowing capacity, hedging can reduce the probability that the firm lacks the financing needed to take on positive NPV projects. c. Hedging enhances the effectiveness of incentive-based compensation by increasing the amount of risks that are out of mangers' control d. Hedging will not reduce a firm's expected tax expense if the firm's expected net income is positive. e. None of the above
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