What is basis risk?
What will be an ideal response?
The basis is the difference between the price of the futures contract at time t, for a particular maturity in the future, and the spot rate at time t. At the maturity date, the basis is zero. If the maturity of your foreign currency asset or liability does not match a settlement date in the futures market, the relationship between the spot exchange rate at the time the transaction takes place and the futures price of the foreign exchange is somewhat uncertain (as the basis is not zero). To provide a perfect hedge, the price of the futures contract should move one-for-one with the spot exchange rate. Then, being long in the foreign currency from an underlying transaction can be hedged by going short in the corresponding futures contract. If this is not the case, the hedge is said to suffer basis risk.
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All of the following are important provisions of the Sarbanes-Oxley Act except:
a. The establishment of a new Public Company Accounting Oversight Board. b. The requirement to prepare both FASB and IASB financial statements. c. A requirement that the external auditors report directly to the company's audit committee. d. A clause to prohibit public accounting firms that audit a company from providing any other services that could impair their ability to act independently in the course of their audit.
A stock order point of 10 means ordering the product ________
A) every 10 days B) when stock falls to 10 units C) every 10 units D) when stock falls to 9 units E) in batches of 10 items
Which of the following is a question that you need to answer to successfully analyze your audience?
A) What is the main concern of the presentation? B) Who are the key players? C) Will you be standing and presenting the slides? D) How quickly can you complete the presentation? E) Can you embed video within your presentation?
When deciding whether to issue debt or equity financing, the board of directors should
a. calculate the earnings per share under each option. b. consider all factors. c. remember that stock dividend payments must be paid on time; otherwise, the shareholders could force the company into bankruptcy. d. calculate the current ratio under each option.