14. The theory that states that exchange rates adjust so that identical goods co
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Question
14. The theory that states that exchange rates adjust so that identical goods cost the same amount regardless of where in the world they are purchased is known as: a. interest rate arbitrage b. interest rate parity c. purchasing power parity d. domestic preference th 15. A in the event of increased milk prices. In this case, the company is hedging its: n ice cream company buys futures on milk to protect itself a. demand risk b. political risk c. foreign-exchange risk d. commodity risk 16. The type of insurance that a company can buy to protect itself from the possible loss of income resulting from the disability or death of an employee in a vital position would be: a. property insurance b. key person insurance c. worker's compensation insurance d. business interruption insurance 17. A privately negotiated contract between a buyer and a seller for the purchase and sell of an asset at an agreed upon price is: a. forward contract b. futures contract c. call option contact d. put option contract 18. Futures contracts trade on regulated exchanges and offer which of these advantages: a. eliminates default risk b. lessens liquidity risk c. makes it easier to calculate the value of the contract at any given time d, all of the above 19. Call options give its holder the right to specific commodity or financial instrument at a specified price. a. buy b. sell c. trade d. regulate 20. The sell a specific commodity is called the price at which an options holder has the right to buy or a. premium pric b. exercise price c. expiration d, intrinsic valueExplanation / Answer
14.
The theory that states that exchange rate adjust so that identical goods cost the same amount regardless of where in the world they are purchased is known as Purchasing Power Parity.
Option (C) is correct answer.
15.
An Ice Cream company buy futures on milk to protect itself in the event of increased milk price. In this case company is hedging commodity risk.
Option (D) is correct answer.
16.
The type of insurance that a company can buy to protect itself from the possible loss of income resulting from disability or death of an employee in a vital position would be worker compensation insurance.
Option (C) is correct answer.
17.
A privately negotiated contract between buyer and seller for the purchase and sell of an assets at an agreed price is called forward contract.
Option (A) is correct answer.
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