Question 1

Which of the following will increase the value of a call option?

A. An increase in the strike price.
B. An increase in the time to expiry.
C. A decrease in the volatility of the share.
D. A decrease in the market value of the share.

Question 2

JKL makes large export sales to customers in country X, whose currency fluctuates significantly against JKL's home currency JKL also makes large purchases from suppliers in countrrOC All of these transactions are in country X's currency

JKL's treasurer does not actively hedge currency risks because there is a natural hedge in place due to the company making both sales and purchases in the same currency

JKL's board has instructed the treasurer to put active hedging measures in place because the risk report would otherwise have to disclose the fact that JKL has a currency risk which is not actively hedged

Which of the following statements are correct? Select ALL that apply.

A. Risk reports can change behaviour
B. Risk reporting is a bad thing
C. The board may be concerned it will be criticised if it does not hedge
D. The board does not want to be blamed for ignoring a risk.
E. Risk reporting drives the whole risk management process

Updated CIMAPRO19-P03-1 Practice Questions BY Doyle

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