BEC 3

Question 1

An American importer expects to pay a British supplier £500,000 in three months. Which of the following hedges is best for the importer to fix the price in dollars?

Buying British pound call options.
Buying British pound put options.
Selling British pound put options.
Selling British pound call options.

Answer 1

Buying British pound call options. because he will be paying in British pounds he wants the option to buy pounds in the future

Question 2

A company has several long-term floating-rate bonds outstanding. The company’s cash flows have stabilized, and the company is considering hedging interest rate risk. Which of the following derivative instruments is recommended for this purpose?

Structured short-term note.
Forward contract on a commodity.
Futures contract on a stock.
Swap agreement.

Answer 2

Swap agreement.

Question 3

What is the formula for required rate of return

Answer 3

Risk free rate + beta(Expected(market) rate - Risk free rate)

Question 4

Which of the following statements about risk appetite, tolerance, and risk indicators are true?

Risk appetite applies to the development of strategy, tolerance applies in the implementation of strategy, and key risk indicators apply at any level of the business.

Tolerance applies to the development of strategy, risk appetite applies in the implementation of strategy, and key risk indicators apply at any level of the business.

Answer 4

Risk appetite applies to the development of strategy, tolerance applies in the implementation of strategy, and key risk indicators apply at any level of the business.

Question 5

Market in which pricing decisions are interdependent across firms

Answer 5

Oligopoly

Question 6

Most likely to use price discrimination to increase revenue in the short run

Answer 6

Monopoly

Question 7

Pricing most likely to follow that set by market price leader

Answer 7

Oligopoly

Question 8

Most likely to invest in brand development

Answer 8

Monopolistic competition

Question 9

Least likely to invest in extensive advertising of goods/services

Answer 9

Perfect Competition

Question 10

Most likely to engage in extensive market research, product development, innovation, and advertising

Answer 10

Monopolistic Competition

Question 11

If a monopolistic competitive market business operates at lowest avg total cost and its marginal cost is greater than marginal revenue what are the effects on the company

Maximizing profits
earning less than max profit
just breaking even and should continue to operate
minimizing loss and should continue to operate
should shut down

Answer 11

Just breaking even and should continue to operate

Question 12

A computer sitting on a user’s desk that includes a keyboard and a mouse is unlikely to be a(n):
Desktop.
Laptop.
Server.
Thin client.

Answer 12

Server

Question 13

Reggie Sloanback, the operations manager, writes a spreadsheet to keep track of fixed assets at Mason’s Masonry and Stoneworks, a manufacturer of stone structures and sculptures. His spreadsheet does not link to the ERP used at Mason’s. The most serious internal control concern about this situation is

Incompatibility of operating systems.
Overcentralization of systems.
User-developed systems can create control issues.
The use of incompatible devices.

Answer 13

User-developed systems can create control issues.

Question 14

A downward-sloping yield curve depicting the term structure of interest rates implies that

Interest rates have declined over recent years.
Interest rates have increased over recent years.
Prevailing short-term interest rates are lower than prevailing long-term interest rates.
Prevailing short-term interest rates are higher than prevailing long-term interest rates.

Answer 14

Prevailing short-term interest rates are higher than prevailing long-term interest rates.

Question 15

Which of the following statements about business analytics is true?

Business analytics is the same as audit analytical procedures.
Audit data analytics is restricted to internal auditor use.
Business analytics is useful in preventing and detecting fraud.
Business analytics primarily consists of giving users access to new data.

Answer 15

Business analytics is useful in preventing and detecting fraud.

Question 16

Which of the following is true of enterprise resource planning (ERP) systems?

I. The online analytical processing system (OLAP) provides data warehouse capabilities for the ERP system.

II. The ability of an ERP system to provide an integrated view of transactions in all parts of the system is a function of the online transaction processing (OLTP) system.

I only.
II only.
Both I and II.
Neither I nor II.

Answer 16

I only

The online analytical processing system (OLAP) incorporates data warehouse and data mining capabilities within the ERP.

The online transaction processing system (OLTP) records the day-to-day operational transactions and enhances the visibility of these transactions throughout the system. It is primarily the OLAP and not the OLTP, that provides an integrated view of transactions in all parts of the system. The OLTP is primary concerned with collecting data (and not analyzing it) across the organization.

Question 17

Which one of the following would not be included in the calculation of the gross domestic product (GDP)?

Purchase of a new home.
An automotive worker’s wages.
A doctor’s fee.
Purchase of common stock.

Answer 17

Purchase of common stock.

Question 18

True or False: When calculating gross profit you use Net sales and not gross sales.

Answer 18

True

Question 19

On January 1, 2005, Lake Co. increased its direct labor wage rates. All other budgeted costs and revenues were unchanged.

How did this increase affect Lake’s budgeted breakeven point and budgeted margin of safety?

Answer 19

Break Even will increase and Budgeted margin of safety will decrease

Question 20

The producer price index measures

The price of a basket of commodities at the point of the first commercial sale.
Price changes for all products sold by domestic producers to foreigners.
Price changes of goods purchased from other countries.
The price of a fixed market basket of goods and services purchased by a typical urban consumer.

Answer 20

The price of a basket of commodities at the point of the first commercial sale

Question 21

An organization’s computer help desk function is usually a responsibility of the

Answer 21

Systems administration and programming unit.

Question 22

What would be the primary reason for a company to agree to a debt covenant limiting the percentage of its long-term debt?

Answer 22

To reduce the interest rate on the debt being issued.

Question 23

In the COBIT model, __________ is an (are) example(s) of an information criterion while _________ is an example of (an) IT resource(s).

Answer 23

Standards for user response times, network structure

Question 24

The ability to add or update documentation items in data dictionaries should be restricted to

Answer 24

Database administrators.

Question 25

The rate of unemployment caused by changes in the composition of employment opportunities over time is referred to as the

Answer 25

Structural unemployment rate.

Question 26

HMDs:

Are fully immersive.
Include three optical displays.
Partly result from the IoT.
Depend on an unoccluded field of vision.

Answer 26

Partly result from the IoT.

Question 27

A company’s rate of return on investment (ROI) is equal to the

Percentage of profit on sales divided by the capital employed turnover rate.
Percentage of profit on sales multiplied by the capital employed turnover rate.
Investment capital divided by the capital employed turnover rate.
Investment capital multiplied by the capital employed turnover rate.

Answer 27

Percentage of profit on sales multiplied by the capital employed turnover rate.

Question 28

1: IT reports 17 incidents of denied attempts to access the system.

Consider the following two items, which are included in a risk report received by the CEO of Kiki’s Delivery Service, a global transportation and logistics company.

#2: IT analysis indicates a 5% probability of a level 2 system breach within the next 3 months.
Item #1 is a __________ while item #2 is a __________.

key performance indicator; key risk indicator
portfolio view of risk, risk profile view
key risk indicator; key performance indicator
risk profile view; portfolio view of risk

Answer 28

key performance indicator; key risk indicator

Question 29

In determining cash flows from a proposed investment, the amount of the investment’s depreciation tax savings (shield) in a given year is equal to

Answer 29

The depreciation times the tax rate.

Question 30

Which of the following is the primary advantage of using a value-added network (VAN)?

It provides confidentiality for data transmitted over the Internet.
It provides increased security for data transmissions.
It is more cost effective for the company than transmitting data over the Internet.
It enables the company to obtain trend information on data transmissions.

Answer 30

It provides increased security for data transmissions.