QUESTION: 197

A company determines that no combination of risk control or financing techniques will produce an adequate, risk-adjusted rate of return on manufacturing a new product. It decides to discontinue the product line. This is an example of:

capacity error.
indemnification.
exposure avoidance.
consequential damages.

Answer(s): C

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QUESTION: 198

Which of the following is NOT an operational risk?

Workers’ compensation risk
Fidelity risk
Surety risk
Currency risk

Answer(s): D

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QUESTION: 199

A U.S. firm acquires a large U.K. manufacturer that generates high levels of cash flow in its local currency. The purchase is denominated in British pounds and is financed through the issuance of 10-year, 7.5% U.S. dollar bonds. The U.S. firm will rely entirely on the U.K. manufacturer's cash flows to fund the interest payments on the bonds. What derivative instrument would help the U.S. firm manage its FX exposure?

Currency forward
Currency swap
Interest-rate swap
Currency future

Answer(s): B

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QUESTION: 200

A treasury manager expects the price of a commodity to be highly volatile between the time of option purchase and exercise. Which option style would provide the greatest flexibility?

American Style
Bermuda Style
Cayman Style
European Style

Answer(s): A

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QUESTION: 197

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QUESTION: 199

QUESTION: 200