Use the Following to Answer the Question(s) Below

question 7

Multiple Choice

Use the following to answer the question(s) below.
As a result of the financial crisis in the fall of 2008, when the government intervened to help the economy, an investor was considering various strategies for her money and the estimated profits would depend on how successful the intervention would be in helping the economy. The estimated annual return for two different investment strategies are shown in the following table.
-The expected value of perfect information is

• A) $590.
• B) -$250.
• C) $1290.
• D) $700.
• E) -$450.

Understand the principles of financial risk management and the goal it serves in stabilizing a firm’s cash flows and costs.

Grasp the differences between various financial contracts (forwards, futures, options, swaps) and their unique characteristics.

Acknowledge the factors driving the use of derivatives by firms, particularly for managing foreign exchange exposure and the cost of inputs.

Understand the concept of transaction exposure and how corporations manage this risk through derivatives.