EXERCISE 4: TYPES OF RISKSThere are three types of risk-related financing options: business risk, financial risk,and instrument risk. List each of the following under the appropriate risk concept:LeverageMore debtBondsInsolvencyBusiness variationsMortgageFinance costsEconomic environmentUnsecured loansCommon sharesHigh-tech businessesIndustry environmentConditional sales contractsCapital structureUncertainty

Risk: It is a situation where the actual results may be less than the expected results. Risks can…

Answered: EXERCISE 4: TYPES OF RISKS There are…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 2P

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Loans are collateralized to:a increase returnsb increase liquidityc reduce concentration riskd all of the above Contingency liquidity support includes:a sale of short term securitiesb repo agreementsc secured line of credit from another financial institutiond sale of equity
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Comment on each manager’s interpretation of OAS. Manager 1: “The OAS is a measure of the value of the option embedded in the bond. That is, it is the compensation for accepting option risk.” Manager 2: “The OAS is a measure of the spread relative to the Treasury on-the-run yield curve and reflects compensation for credit risk and liquidity risk.”
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REQUIREMENTS: 1. How much is the cost of equity using the capital asset pricing model? 2. How much is the cost of equity using the bond plus risk premium?
4.-According to Financial Management approaches, the financial manager's objectives are stated as and measured with: Options:A) Obtain profitability and liquidity, for financial reasons. B) To maximize profitability and wealth, by leverage and upa. c) Maximize profitability and wealth, by liquidity and profitability. d) Maximize wealth and profit, by liquidity and upa. (Choose one option) (Class exercise)
1. Explain the profitability-risk trade-off of alternative levels of working capital balances. 2. Explain the profitability-risk trade-off of alternative methods of financing a given working capital investment. 3. Discuss the profitability versus risk trade-offs associated with alternative levels of working capital investment. 4. A. which of the following working capital financing policies subjects the firm to a greater risk?i. Financing permanent current assets with short-term debtii. Financing fluctuating current assets with long-term debtB. Which policy will produce the higher expected profitability?
A. Briefly explain three risk exposures that an analyst should report as part of anenterprise risk management system.Page 4 of 10B. Define market risk and the economic parameters considered when calculatingmarket risk.C. Explain the concept of ‘beta’ within the framework of the Capital Asset PricingModel (CAPM). Discuss the relevance of the covariance between assets returnsfor an investor wishing to diversify the risk of a portfolio
Which of the following is not one of the 5 C's of Credit? Question 12 options: Collateral Capital Condition Corporate Analysis

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