FIN 504-Chapter1-3
FIN 504 Chapter 1~3
I. Multiple Choices – Solutions are highlighted in bright green. Detailed solutions are written in red texts.
1. If the spot rate for the Swiss Franc is $0.6658 and the 6-‐month forward rate is $0.6437, what is the annualized premium (discount)? a. discount of (-‐)6.64%
b. discount of 6.87% c. premium of 6.64% d. premium of 6.87% (!.!"#$!!.!!"#)
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Solution: × ! ×!""% = −!. !"% !.!!"#
2. As a result of accounting scandals, several methods have been developed to deal with the issues of corporate governance. They are all of the following EXCEPT: a. Chairman of the Board position should be split from the CEO position. b. The Board must select only SEC approved consultants. c. Board of Directors should have a majority of independent directors. d. All members of audit and compensation committee must be independent directors.
3. Financial decisions should be consistent with the goal of shareholder wealth maximization. However, there may be a divergence between shareholder wealth maximization and the actual goals of management. The primary reason for this is:
a. There is a separation of
I. Multiple Choices – Solutions are highlighted in bright green. Detailed solutions are written in red texts.
1. If the spot rate for the Swiss Franc is $0.6658 and the 6-‐month forward rate is $0.6437, what is the annualized premium (discount)? a. discount of (-‐)6.64%
b. discount of 6.87% c. premium of 6.64% d. premium of 6.87% (!.!"#$!!.!!"#)
!"
Solution: × ! ×!""% = −!. !"% !.!!"#
2. As a result of accounting scandals, several methods have been developed to deal with the issues of corporate governance. They are all of the following EXCEPT: a. Chairman of the Board position should be split from the CEO position. b. The Board must select only SEC approved consultants. c. Board of Directors should have a majority of independent directors. d. All members of audit and compensation committee must be independent directors.
3. Financial decisions should be consistent with the goal of shareholder wealth maximization. However, there may be a divergence between shareholder wealth maximization and the actual goals of management. The primary reason for this is:
a. There is a separation of