Question

1. Which of the following is NOT a source of financial risk?

A. Commodity price fluctuations.

B. Equity price fluctuations.

C. Exchange rate fluctuations.

D. Liquidity fluctuations.

E. Interest rate fluctuations.

2. When we draw a graph showing that the value of Air Canada decreases as the price of oil increases, this is an example of a ________.

A. Risk profile.

B. Risk frontier.

C. Risk map.

D. Volatility map.

E. Volatility index.

3. The payoff profile resulting from a perfect hedge with a forward contract is _________.

A. A downward-sloping curve.

B. An upward-sloping curve.

C. A downward-sloping straight line.

D, A horizontal straight line.

E, An upward-sloping straight line.

Answer 1

1.Correct answer is option D. Liquidity Fluctuations.

It is to be noted that Price Fluctuations like Commodity price fluctuations,Equity price fluctuations,Exchange rate fluctuation and Interest rate fluctuation are a source of financial risk. However Liquidity fluctuation is source of liquidity risk and not financial risk.

2.The correct answer  is option E.Volatility index.

Volatility index is the graph represents the changes in the share price of the stock with the change in oil prices, with X and Y axis.

3. Correct answer is option D. A horizontal straight line.

Answer 2

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