FIN 415 Final Exam

In this file of FIN 415 Final Exam you will find the next information:

Section 1

1. The art of risk management is to identify risks specific to an organization and to respond to them in an appropriate way.

2. All levels of an organization do not need to be included in the management of risk in order for it to be effective.

3. Qualitative Risk Analysis Techniques seek to compare the relative significance of risk facing a project in terms of the effect of their occurrence on the project outcome.

4. Quantitative techniques are used when the likehood of the investment or project achieving its objectives with time and budget is required.

5. A forward exchange contract requires delivery at a specified future date of one currency for a specific amount of another currency.

6. Risk tolerance is the degree that one is willing to risk losing some of his original investment in exchange for a chance to earn a higher return.

Section 2

Our new start up company has created a new product that we think we do a fantastic job, but our job as risk managers is to calculate what could happen if things do not work out. What is the expected value of profits in the following scenario:

Section 3

1. Which of the following best describes risk management?

a. A formal process to identify risks.

b. A formal process to assess, identify and manage risk.

c. A formal process to cover up mis-management.

d. A formal process by the Board to direct operating activities.

e. None of the above.

2. Which of the following are soft benefits of risk management?

a. Enhancement of team spirit.

b. Proper risk allocation.

c. Improved Communications.

d. Improved Profits.

e. a and c.

3. What is the Delphi technique?

a. Consulting with a subject matter expert on the topic.

b. Consulting with senior management on a topic.

c. Used when assessing risk.

d. Consulting with the Board of Directors on a topic.

e. None of the above.

4. Which of the following are tools to manage risk?

a. Time value of money.

b. Qualitative.

c. Quantitative.

d. b & c.

e. None of the above.

5. Risk management is an essential part of the project and business planning cycle which requires which of the following:

a. Requires less strategy and more imagination and ingenuity.

b. Generates an unstructured response to risk in terms of alternative plans, solutions, and contingencies.

c. is a thinking process requiring poor imagination and a lack of ingenuity.

d. requires acceptance that uncertainty exists.

e. generates an unrealistic attitude in an investment for staff by preparing them for risk events rather than being taken by surprise when they arrive.

6. Market risk refers to:

a. The chance that a business may not find underwriters.

b. The chance that a firm's product/service will not be successful in the market.

c. Gains or losses from secondary market sales due to general movements in financial markets.

d. The chance that the issuer of a financial instrument will make some bad decisions that are adversely affects it operations.

e. All of the above.

7. The proposed risk management assessment system will do all of the following, except:

a. Identify possible future markets.

b. Identify and manage risk.

c. Adjust strategy to respond to risk.

d. Increase changes of project and business success.

e. Ensure stock price increases.

8. Key components of program management include which of the following:

a. Organizational management.

b. Capital budgeting technique application.

c. Resource maximization.

d. Time-series analysis.

e. Monte Carlo Simulation.

9. Which of the following are outputs of risk identification

a. Historical Information

b. Risk Symptoms.

c. Product or service descriptions.

d. Eliminated from the process.

e. None of the above.

10. Country risk analysis involves assessing which of the following?

a. Economic risk.

b. Political risk.

c. Government risk.

d. Cultural risk.

e. All of the above

11. Monte Carlo simulation does which of the following?

a. Gives you a practical, virtual simulation

p>b. Does not produce a mathematical model.

c. Produces a mathematical model.

d. a & b.

e. b & c.

12. Which of the below is the best definition of business risk?

a. The variability in a firm's earnings per share that derives from its sales variability in conjunction with fixed interest costs and debt service.

b. The chance that a business firm will not be able to repay a loan.

c. The chance that paying the interest due to a firm's creditors will result in losses to its bond holders

d. The variability in a firm's earnings per share that derives from its sales variability in conjunction with fixed operating costs.