Financial Risk Management Quiz, Quizzes of Credit and Risk Management

Download Financial Risk Management Quiz and more Quizzes Credit and Risk Management in PDF only on Docsity! Financial Risk Management Quiz Each question in the quiz is of identification, and “true or false” format. Read each question carefully, and click on the button next to your response that is based on the information covered on the topic discussed. After responding to a question, click on the "next question" button at the bottom to go to the next question. The total score for the quiz is based on your responses to all questions. If you respond incorrectly to a question or retake a question again and get the correct response, your quiz score will reflect it appropriately. However, your quiz will not be graded, if you skip a question or exit before responding to all the questions. Part 1. Identification. 1. ________ are the major source of long-term debt financing for most corporations. Ans: Bonds 2. __________ is a short-term security, or note, containing a borrower's promise to pay. ans: Commercial paper 3. __________ is long-term borrowing from sources outside of the company. Ans: Debt financing 4. __________ is the use of common stock and/or retained earnings to raise long- term funding. Ans: Equity financing 5. The principle that safer investments tend to offer lower returns while riskier investments tend to offer higher returns is called. Ans: Risk-return relationship Cost volume profit analysis Business risk Inflation premium PERT Put option Maturity risk premium Scatter graph Credit risk Financial risk Swap agreement Default risk premium Recession Enterprise risk management Interest rate risk Operational risk PART 2. Make use of the terms listed above to help you identify the questions being presented. 6. It evaluates operating decisions. Ans: Cost volume profit analysis 7. Technique used in project management that focuses on the time required to complete each step in a project. It allows a project manager to monitor a project's progress and identify potential bottlenecks/delays that will postpone completion date. Ans: PERT 8. Used in statistical analysis to plot relationships between variables to determine a line function that best describes those relationships. Ans: Scatter graph 9. Private agreement between two parties, generally assisted by an intermediary, to exchange future cash payments. Ans: Swap agreement 10.Risk associated with the unique circumstances of a particular company, as they might affect the shareholder value of the company. Ans: Business risk 11.Specifies time conditions and is not indefinite. Ans: Put option 12.The ability of a firm to obtain, not grant, credit. Require rate of return adjustments do not include a credit risk adjustment Ans: Credit risk 13.Appropriate risk adjustment to the risk-free rate of return and is the additional compensation demanded by lenders for bearing the risk that the issuer of the security will fail to pay interest or fail to repay the principal. Ans: Default risk premium