In a firm commitment procedure, the majority of risk
of the issue is borne by
A.
Designated Market Maker
B.
Issuing Firm
C.
Underwriter Syndicate
D.
Credit rating agencies
17. The type of risk that is associated with the
specific operations of the firm is referred to as:
A. systematic risk
B. non diversifiable risk
C. financial risk
D. business risk
E. both C and D
18. A very risk averse individual would most likely
choose a stock with a beta coefficient of:
A. equal to 1
B. greater than 1
C. greater than 2
D. equal to 2
E. less than 1
How
can a firm reduce its operating economic exposure to foreign
exchange risk. What actions could the firm take to reduce its risk?
What are some possible reasons for foreign direct
investment?
(a)What is exchange rate risk? Distinguish between Transaction
Exposure and Economic exposure to exchange rate movements.
(b)Consider the following
information:
90-day U.S interest rate………………………………………………………….4%
90-day Malaysian interest rate……………………………………………….3%
90-day forward rate for the Malaysian Ringgit ……………………..$0.400
Spot Rate of Malaysian Ringgit ………………………………………………$0.404
Assume a U.S based MNC will need 300,000 Ringgit in 90 days and
wishes to hedge this payable position. Would it be better off using
a FORWARD hedge or MONEY MARKET hedge?