Firms Engage in Transactions That Subject Them to Specific Financial

question 111

Multiple Choice

Firms engage in transactions that subject them to specific financial risks.Most firms face risks-that is, variability of outcome-from changes in interest rates, foreign exchange rates, and commodity prices.Firms can purchase financial instruments to reduce these business risks, that is, to reduce the volatility of certain outcomes.Some of these instruments trade in relatively active markets, like marketable securities, while others have specialized terms and do not trade at all.The general term used for the types of financial instruments that firms might buy to mitigate the risks is a(n)

• A)swaps.
• B)derivative.
• C)forwards.
• D)futures.
• E)options.

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