Practice Question Set: How Do Firms Manage Financial Risk?

Chapter 2, How Do Firms Manage Financial Risk? Practice Question Set covers the following learning objectives:

* Compare different strategies a firm can use to manage its risk exposures and explain situations in which a firm would want to use each strategy.

* Explain the relationship between risk appetite and a firm’s risk management decisions.

* Evaluate some advantages and disadvantages of hedging risk exposures, and explain challenges that can arise when implementing a hedging strategy.

* Apply appropriate methods to hedge operational and financial risks, including pricing, foreign currency, and interest rate risk.

* Assess the impact of risk management tools and instruments, including risk limits and derivatives.

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