E4 Valuation and hedging with derivatives

Written by Saad Rahman (ACCA)

اے سی سی اے · ایکسپرٹیز لیول میں نیا · 8 سوالات

نام: ____________________   تاریخ: ____________

1. Which valuation method uses net realisable value of assets?

   • A The P/E method
   • B Asset-based valuation
   • C The dividend growth model
   • D CAPM

2. What is a limitation of the P/E valuation method?

   • A It uses future cash flows only
   • B It depends on finding a comparable company
   • C It ignores earnings
   • D It needs no estimates

3. What is a feature of exchange-traded currency futures?

   • A They are tailor-made
   • B They are standardised and need margin payments
   • C They have no basis risk
   • D They need no deposit

4. What does an OTC currency option give the holder?

   • A No protection
   • B The right, but not the obligation, to buy or sell at a set rate
   • C The obligation to buy or sell
   • D A guaranteed profit

5. Which hedge removes both the risk and the possible gain from a favourable move?

   • A A forward contract
   • B A currency option
   • C Doing nothing
   • D Leading and lagging

6. A company must pay FC 600,000 in 3 months. The spot rate is FC 3.00 to $1 and the 3-month foreign deposit rate is 2 percent. What does it deposit now, to the nearest unit?

   • A FC 612,000
   • B FC 600,000
   • C FC 576,000
   • D FC 588,235

7. What does basis risk mean in a hedge?

   • A The risk of tax change
   • B The hedge does not move exactly with the exposure
   • C The risk of inflation
   • D The risk of default by the bank

8. Behavioural finance suggests that share prices can be affected by:

   • A Only dividends
   • B Only fundamentals
   • C Investor psychology, such as herding and overconfidence
   • D Only tax