FIN 420 FINAL EXAM MERGERS
ACQUISITIONS AND CORPORATE
RESTRUCTURING FINANCIAL ANALYSIS
QUESTION SET
●● The basis on a futures contract is defined as
Answer: the cash price minus the futures price
●● A banks hedge ratio will determine
Answer: The appropriate number of futures contracts relative to cash
market exposure
●● Banks use financial derivatives for all of the following except:
Answer: Banks use financial derivatives for all of the above
adjust the sensitivity of earnings to changes in interest rates.
lock-in the cost of liabilities.
adjust maturities by creating synthetic liabilities.
, ●● A bank anticipates it will need to borrow funds in the Eurodollar
market in the future. It hedges by selling futures contracts. If rates
decline, which of the following is true?
Answer: The bank will profit in the cash market.
●● The daily change in the value due to the marking-to-market process
is know as the
Answer: variation margin.
●● Which of the following is true about the futures rates
Answer: They can provide information about the expectations of future
cash rates
●● Which of the following is not true regarding the basis?
Answer: The basis may not equal zero before expiration.
●● Which of the following primarily takes futures positions that are
outstanding for just minutes?
Answer: Scalper
●● The basis:
Answer: Futures rate less the cash rate
ACQUISITIONS AND CORPORATE
RESTRUCTURING FINANCIAL ANALYSIS
QUESTION SET
●● The basis on a futures contract is defined as
Answer: the cash price minus the futures price
●● A banks hedge ratio will determine
Answer: The appropriate number of futures contracts relative to cash
market exposure
●● Banks use financial derivatives for all of the following except:
Answer: Banks use financial derivatives for all of the above
adjust the sensitivity of earnings to changes in interest rates.
lock-in the cost of liabilities.
adjust maturities by creating synthetic liabilities.
, ●● A bank anticipates it will need to borrow funds in the Eurodollar
market in the future. It hedges by selling futures contracts. If rates
decline, which of the following is true?
Answer: The bank will profit in the cash market.
●● The daily change in the value due to the marking-to-market process
is know as the
Answer: variation margin.
●● Which of the following is true about the futures rates
Answer: They can provide information about the expectations of future
cash rates
●● Which of the following is not true regarding the basis?
Answer: The basis may not equal zero before expiration.
●● Which of the following primarily takes futures positions that are
outstanding for just minutes?
Answer: Scalper
●● The basis:
Answer: Futures rate less the cash rate
