A hedge between which two of the following firms is most apt to reduce each firm's financial risk exposure?

A hedge between which two of the following firms is most apt to reduce each firm's financial risk exposure?    A.  wheat farmer and bakery B.  oil producer and coal miner C.  wheat grower and pharmaceutical firm D.  pastry bakery and cotton farmer E.  shoe manufacturer and coat manufacturer Refer to section 23.2

16.

Which one of the following statements is correct in relation to a firm's short-run financial risk?    A.  Short-run financial risk results from permanent changes in prices due to new technology. B.  A financially sound firm can become financially distressed as the result of its short-run exposure to financial risk. C.  Each segment of a business should be responsible for hedging its own short-run financial risk. D.  Short-run financial risk is defined as temporary price changes which result directly from natural disasters, such as tornadoes, droughts, and floods. E.  Thus far, hedging techniques have been unsuccessful in reducing short-run financial risk. Refer to section 23.2

17.

Long-run financial risk:    A.  can frequently be hedged on a permanent basis. B.  is best hedged on a division by division basis within a conglomerate. C.  is related more to near-term transactions than to advancements in technology. D.  generally results from changes in the underlying economics of a business. E.  can generally be hedged such that the financial viability of a firm is protected. Refer to section 23.2

18.

By hedging financial risk, a firm can:    A.  ensure a steady rate of return for its shareholders. B.  eliminate price changes over the long-term. C.  ensure its own economic viability. D.  gain time to adapt to changing market conditions. E.  eliminate its exposure to price increases in raw materials. Refer to section 23.2

19.

The seller of a forward contract:    A.  is obligated to make delivery and accept the forward price. B.  has the option of making delivery and receiving the greater of the spot price or the contract price. C.  has the option of either making delivery or accepting delivery. D.  is obligated to take delivery and pays the lower of the spot market price or the contract price. E.  is obligated to take delivery and pay the forward price. Refer to section 23.3