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General Mills (GIS) would most likely take long positions in oat futures.
True or False
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Country risk limits set by management of a multi-national industrial company are irrational since the company is obligated to take on as many profitable projects as possible no matter where the project is located.
True or False
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Enterprise risk management is based on placing risks into silos not evaluating the aggregate of risk.
True or False
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Oat futures contracts traded on the CME are only available for two months into the future. This is why most companies that use oats rely on forward contracts.
True or False
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Lam points out that if increasing insurance premiums make ART solutions more economical. If ART solutions prove successful, then they draw in new users increasing the liquidity and transparency of the market for ART solutions.
True or False
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A book publisher tries to publish 100 titles each year from 100 different authors. The books are evenly split between fiction and non-fiction. This is an example of using diversification to manage business risk.
True or False
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An effective transfer of risk will lower the amount of equity the firm needs to operate. This will in turn enable the firm to further expand its balance sheet with debt.
True or False
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One oat futures contract is an obligation for the buyer to deliver 5000 bushels of oats in return for a fixed price on a fixed date.
True or False
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A company can use futures and forward contracts to change its risk profile.
True or False
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The use of financial leverage by a company will magnify the return on equity relative to the firm when it is unleveraged.
True or False
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A company that originates mortgages and then sells the mortgage net of servicing would be an example of unbundling risks.
True or False
