E13-Q2

    What are the consideration in designing capital structure of a corporate?

• a.      Trading of capital

• b.      Cost of capital

• c.      Profitability

• d.     All of the above

     Cost of capital refers to:

• a.      Floatation cost

• b.      Dividend

• c.      Minimum required rate of return

• d.      None of the above

   Cost of capital is the minimum rate of return expected by its investors.

• a.      Given statement is true

• b.      Given statement is false

• c.      Given statement is true in some cases

• d.      Given statement is unreasonable

    Which of the following best describes a firm’s cost of capital?

• a.      The average yield to maturity on debt

• b.      The average cost of the firm’s assets

• c.      The rate of return that must be earned on its investments in order to satisfy the firm’s investor

    A firm’s capital structure consists of which of the following?

• a.      Common stock

• b.      Preferred stock

• c.      Bonds

• d.     All of the above

  This is the transaction affected by change in exchange rates.

• a.      Explicit risk

• b.     Implicit risk

• C. Economic risk

  It is a standardized agreement between two parties to take delivery of a currency at a future date and at a predetermined price.

• a.      Forward contract

• b.     Future contract

• c.      Spot contract

   It is the result of transactions, liabilities denominated in a foreign currency.

• a.      Forex

• b.      Fixed rate

• c.      Floating rate

  Exchange rate movements are a factor on the global economy.

• a.      True

• b.      False

Market participants use forex to hedge against international currency and interest rate risk.

• a.      True

• b.      False