BEC 1 Flashcards

1
Q

3 objectives of COSO Framework

A

operating, reporting, compliance

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2
Q

5 Components of Internal Control

A
Control Environment 
Risk Assessment 
Information and Communication 
Monitoring Activities
Existing Activities
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3
Q

5 Components of ERM

A
Governance and Culture 
Objective/Strategy Setting
Performance 
Review and revision 
Ongoing reporting, communication, and information
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4
Q

effective interest rate

A

= interest paid / net proceeds

interest paid = principal * stated rate
net proceeds = amount actually received

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5
Q

compound interest

A

P (1 + i)^n

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6
Q

nominal interest rate

A

nominal interest rate = risk free rate + inflation premium

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7
Q

3 areas of risk exposure (when dealing with foreign exchange)

A

transaction –> loss/gain
economic –> PV of cash flows could change
translation exposure –> if you have a foreign sub

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8
Q

when to use forward hedges vs. future hedges

A
futures = smaller transactions 
forwards = larger transactions
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9
Q

When to use Accounts Payable Application of Hedging

A

when domestic currency is weakening

**buy calls, futures, or forwards

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10
Q

When to use Accounts Receivable Application of Hedging

A

when domestic currency is strengthening

**put options, sell futures or forwards

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