AFM

You own a large orange grove and will be harvesting from November through April. To hedge against price risks you should

• sell orange juice contracts with a November delivery

• buy orange juice contracts with a November delivery

• sell orange juice contracts with delivery dates between November and April

• buy orange juice contracts with delivery dates between November and April

If you were confident that the price of stock X would drop dramatically within two months, which of the following investment transactions would yield the highest return on your investment?

• Purchase stock X

• Sell stock X short

• Purchase a call on stock X

• Purchase a put on stock X

Although derivatives can be used as speculative instruments, businesses most often use them to

• Hedge.

• Offset debt.

• Appease stockholders.

• Attract customers.

• Enhance their balance sheets.

Ordinary shares in limited companies:

• have an unlimited life, and voting rights but receive no dividends

• have an unlimited life, and voting rights and receive dividends

• have a limited life, and voting rights and receive dividends

• have a limited life, with no voting rights but receive dividends

Preference shares:

• are not allowable for corporation tax

• are not part of a company’s share capital

• have no voting rights

• receive dividends

A debenture:

• does not require security

• is a long-term loan

• receives dividend payments

• is a short-term loan

Which is the following is not a method of issuing ordinary shares:

• Offer for sale

• preferential issue

• book building

• tender offer

Investors agree to invest in high- risk investments if only

• There are any true speculations

• The predicted return is satisfactory for taking a risk

• There are no safe options except for holding cash

• The return is short

The shareholders can extend their shareholdings by issue of _________ from the company.

• Bonus Share

• Right Share

• Either of the above

• None of the above

A collection of assets in which an investor invests is known as a ______.

• Block of Assets

• Portfolio

• Securities

• All of the above