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NEW QUESTION 38
The Treasurer of Z intends to use interest rate options to set an interest rate cap on Z's borrowings.
Which of the following statement is correct?
- A. The Treasurer should buy an interested rate floor and sell an interested cap ta the same time
- B. The Treasurer will have to negotiate the options with Z's Dark
- C. The cost of a collar is lower than the cost of a cap a one.
- D. The Treasurer will retain the benefit of movcTcnt3 in interest ratc3 below the floor limit.
Answer: C
NEW QUESTION 39
A UK based company is considering investing GBP1 ,000,003 in a project it the USA. It is anticipated that the project will yield net cash inflows of USD580.000 each year for the next three years. These surplus cash flows will be remitted to the UK at the end of each year.
Currently GBP1.00 is worth USD1.30.
The expected inflation rates in the two countries ever the next four years are 2% in the UK and 4% in the USA.
Applying the purchasing power parity theory, which of the following represents the expected remittance at the end of year three, in GBP whole the nearest whole GBP)?
- A. GBP450,906
- B. GBP546,547
- C. GBP568,846
- D. GBP472,916
Answer: A
NEW QUESTION 40
HHH Company has a fixed rate loan at 10.0%, but wishes to swap to variable. It can borrow at the risk-free rate +8%. The bank is currently quoting swap rates of 3.1% (bid) and 3.5% (ask). What net rate will HHH Company pay if it enters into the swap?
- A. Risk-free rate +6.9%
- B. Risk-free rate +8%
- C. Risk-free rate+3.1%
- D. Risk-free rate +6.5%
Answer: C
NEW QUESTION 41
An entity prepares financial statements to 31 December each year. The following data applies:
1 December 20X0
* The entity purchased some inventory for $400,000.
* In order to protect the inventory against adverse changes in fair value the entity entered into a futures contract to sell the inventory for a fixed price on 31 January 20X1.
* The entity designated this contract as a fair value hedge of the value of the inventory.
31 December 20X0
* The inventory had a fair value of $480,000 and the futures contract had a fair value of $75,000 (a financial liability).
What will be the impact on the statement of profit or loss and other comprehensive income for the year ended 31 December 20X0 in respect of the change in the value of the inventory and the futures contract?
- A. A net gain of $5,000 will be recognised in profit or loss.
- B. A loss of $75,000 will be recognised in profit or loss.
- C. A net gain of $5,000 will be recognised in other comprehensive income.
- D. A loss of $75,000 will be recognised in other comprehensive income.
Answer: A
NEW QUESTION 42
A company is reporting under IFRS 7 Financial Instruments: Disclosures for the first time and the directors are concerned about whether this will lead to the disclosure of information that could affect the company's share price.
The company is based in a country that uses the A$ but 40% of revenue relates to export sales to the USA and priced in US$.
When the company reports under IFRS 7 for the first time, the share price is most likely to:
- A. Decrease since investors place a lower value on higher risk businesses.
- B. Stay the same since US$ risk can already be quantified from segmental analysis disclosures included elsewhere in the annual report.
- C. Either increase or decrease depending on market reaction to new information on how financial risk is managed.
- D. Increase due to greater clarity of information available on the extent of US$ risks and how they are managed.
Answer: C
NEW QUESTION 43
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