Derivative Instruments and Hedging Activities MCQs

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On September 1, year 1, Cano & Co., a US corporation, sold merchandise to a foreign firm for 250,000 Botswana pula. Terms of the sale require paymen...






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Lindy, a US corporation, bought inventory items from a supplier in Argentina on November 5, year 1, for 100,000 Argentine pesos, when the spot rate ...






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Ball Corp. had the following foreign currency transactions during year 1: Merchandise was purchased from a foreign supplier on January 20, year 1...






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On November 30, year 1, Tyrola Publishing Company, located in Colorado, executed a contract with Ernest Blyton, an author from Canada, providing for...






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Shore Co. records its transactions in US dollars. A sale of goods resulted in a receivable denominated in Japanese yen, and a purchase of goods resu...






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On October 1, year 1, Mild Co., a US company, purchased machinery from Grund, a German company, with payment due on April 1, year 2. If Milds year ...






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On October 1, year 1, Velec Co., a US company, contracted to purchase foreign goods requiring payment in Qatari riyals, one month after their receip...






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Derivatives are financial instruments that derive their value from changes in a benchmark based on any of the following except






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Derivative instruments are financial instruments or other contracts that must contain






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The basic purpose of derivative financial instruments is to manage some kind of risk such as all of the following except






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Which of the following statements is(are) true regarding derivative financial instruments? I. Derivative financial instruments should be measured at...






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Which of the following is an underlying, according to ASC Topic 815?






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If the price of the underlying is greater than the strike or exercise price of the underlying, the call option is






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Which of the following is not a distinguishing characteristic of a derivative instrument?






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An example of a notional amount is






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Disclosures related to financial instruments, both derivative and nonderivative, used as hedging instruments must include






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Which of the following financial instruments or other contracts is not specifically excluded from the definition of derivative instruments in ASC To...






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Which of the following is not a derivative instrument?






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Which of the following criteria must be met for bifurcation to occur?






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Financial instruments sometimes contain features that separately meet the definition of a derivative instrument. These features are classified as






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The process of bifurcation






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Alvarez Corporation has two hybrid financial instruments. According to ASC Topic 815, how can Alvarez account for these instruments?






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According to ASC Topic 815, when a company elects not to bifurcate a hybrid financial instrument, the entire hybrid instrument should be valued at






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When an election is made not to bifurcate a hybrid financial instrument, how should this be disclosed on the financial statements? I. As separate li...






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If a company elects not to bifurcate a hybrid financial instrument and records the entire instrument at fair value, which of the following is true? ...






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Hedge accounting is permitted for all of the following types of hedges except






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Which of the following is a general criterion for a hedging instrument?






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For an unrecognized firm commitment to qualify as a hedged item it must






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A hedge of the exposure to changes in the fair value of a recognized asset or liability, or an unrecognized firm commitment, is classified as a






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Gains and losses on the hedged asset/liability and the hedged instrument for a fair value hedge will be recognized






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Gains and losses of the effective portion of a hedging instrument will be recognized in current earnings in each reporting period for which of the f...






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Which of the following risks are inherent in an interest rate swap agreement? I. The risk of exchanging a lower interest rate for a higher interest...






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Which of the following meet the definition of assets and/or liabilities? Derivative instruments G/L on the fair value of derivatives






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Which of the following is not a type of foreign currency hedge?






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Which of the following is not a type of foreign currency hedge?






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Which of the following is not a type of foreign currency hedge?






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Which of the following foreign currency transactions is not accounted for using hedge accounting?






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The risk of an accounting loss from a financial instrument due to possible failure of another party to perform according to terms of the contract is...






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Examples of financial instruments with off-balance-sheet risk include all of the following except






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Off-balance-sheet risk of accounting loss does not result from






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If it is not practicable for an entity to estimate the fair value of a financial instrument, which of the following should be disclosed? I. Informat...






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Disclosure requirements for financial instruments include






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Disclosure of credit risk of financial instruments with offbalance- sheet risk does not have to include






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Disclosure of information about significant concentrations of credit risk is required for






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Kline Bank has large amounts of notes receivable from companies with high debt-to-equity ratios as a result of buyout transactions. Kline is contemp...






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Whether recognized or unrecognized in an entitys financial statements, disclosure of the fair values of the entitys financial instruments is requi...






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Under IFRS, a cash flow hedge and a hedge of a net investment are accounted for by






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Strobel Company has a large amount of variable rate financing due in one year. Management is concerned about the possibility of increases in short-t...






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Which of the following techniques is used to value stock options?






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In valuing interest rate swaps, the zero-coupon method uses all of the following variables except






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Which of the following risks relates to the possibility that a derivative might not be effective at hedging a particular asset?






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An American importer of English clothing has contracted to pay an amount fixed in British pounds three months from now. If the importer worries that...






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When a firm finances each asset with a financial instrument of the same approximate maturity as the life of the asset, it is applying






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Banner Electronics has subsidiaries in several international locations and is concerned about its exposure to foreign exchange risk. In countries wh...






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A company has recently purchased some stock of a competitor as part of a long-term plan to acquire the competitor. However, it is somewhat concerned...






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The risk of loss because of fluctuations in the relative value of foreign currencies is called






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How does downgrade risk differ from credit spread risk?






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Which of the following terms is NOT associated with managing credit risk?






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According to the empirical evidence reported by Anson over the time period 1993- 2008, how do the returns of credit-risky investments correlate with ...






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Corporate bank loans that are legally committed lines of credit are known as what?






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Which of the following is TRUE with respect to credit-linked notes?






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Which of the following statements accurately describes the relationship between collateralized bond obligations (CBOs), collateralized debt obligatio...





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Which of the following statements LEAST accurately describes collateralized debt obligations (CDOs), collateralized bond obligations (CBOs), and coll...






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Which of the following statements LEAST accurately describes overcollateralization in the context of collateralized debt obligations (CDOs)?





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Which of the following is NOT one of the three periods of the life cycle of a collateralized debt obligations (CDOs)?






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A CDO trust holds $500 million in bonds with an 9% coupon. The CDO has three tranches: A $400 million A tranche with a coupon of 9%, a $50 million B ...






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Which of the following statements most accurately characterizes a collateralized fund obligation (CFO)?





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Which of the following statements LEAST accurately characterizes a collateralized commodity obligation (CCO)?





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Which of the following statements LEAST accurately characterizes a single-tranche CDO (collateralized debt obligation)?