Q35. Effective cash management involves the tradeoff between the risk of insolve

Question

Q35. Effective cash management involves the tradeoff between the risk of insolvency (resulting in higher near cash balances) and the desire to earn higher returns (resulting in lower near cash balances).
   a. True   b. False

Q41. Foreign currency forward rates aid traders by reducing uncertainty regarding future market fluctuations.
   a. True   b. False

Q45. Triangular arbitrage eliminates exchange rate differentials across three markets for three currencies.
   a. True   b. False

Q49. Only purely domestic firms that buy all of their inputs and sell all of their outputs in their home countries are unaffected by events in international financial markets.
   a. True   b. False

Explanation / Answer

Answer to Question no 35:

Therefore, the correct answer is False. Cash management is a wide term that refers to the concentration, collection and payment of cash. The objective is to administer the cash balances of an enterprise in such a way as to take advantage of the availability of cash not invested in fixed assets or inventories in such a way as to avoid the risk of insolvency.

Answer to Question no 41:

Therefore, the correct answer is true.

Answer to Question no 45:

Therefore, the correct answer is False. Triangular arbitrages do the same crossways the markets for all currencies. Enclosed interest arbitrage eliminate differential across currency and interest rate markets.

Answer to Question no 49:

  Therefore, the correct answer is False.

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