Name: ______________________________________________

Date: ____________________
ACCY 42 Financial Accounting II
I. Indicate (by abbreviation) the type of hedge each activity described below would represent.
Hedge Type
FV
Fair value hedge
CF
Cash flow hedge
FC
Foreign currency hedge
N
Would not qualify as a hedge
___ 1. An options contract to hedge possible future price changes of inventory.
___ 2. A futures contract to hedge exposure to interest rate changes prior to replacing bank
notes when they mature.
___ 3. An interest rate swap to synthetically convert floating rate debt into fixed rate debt.
___ 4. An interest rate swap to synthetically convert fixed rate debt into floating rate debt.
___ 5. A futures contract to hedge possible future price changes of timber covered by a firm
commitment to sell.
___ 6. A futures contract to hedge possible future price changes of a forecasted sale of tin.
___ 7. ExxonMobils net investment in a Kuwait oil field.
___ 8. An interest rate swap to synthetically convert floating rate interest on a stock
investment into fixed rate interest.
___ 9. An interest rate swap to synthetically convert fixed rate interest on a held-to-maturity
debt investment into floating rate interest.
___ 10. An interest rate swap to synthetically convert floating rate interest on a held-tomaturity debt investment into fixed rate interest.
___ 11. An interest rate swap to synthetically convert fixed rate interest on a stock investment
into floating rate interest.
II. Define Derivative.
III.
Three types of Derivatives and provide a brief description
IV.Purpose of derivatives.

Name: ______________________________________________
Date: ____________________
ACCY 42 Financial Accounting II
V. Indicate (by abbreviation) the type of hedge each activity described below would represent.
Hedge Type
FV
Fair value hedge
CF
Cash flow hedge
FC
Foreign currency hedge
N
Would not qualify as a hedge
___ 1. An options contract to hedge possible future price changes of inventory.
___ 2. A futures contract to hedge exposure to interest rate changes prior to replacing bank
notes when they mature.
___ 3. An interest rate swap to synthetically convert floating rate debt into fixed rate debt.
___ 4. An interest rate swap to synthetically convert fixed rate debt into floating rate debt.
___ 5. A futures contract to hedge possible future price changes of timber covered by a firm
commitment to sell.
___ 6. A futures contract to hedge possible future price changes of a forecasted sale of tin.
___ 7. ExxonMobils net investment in a Kuwait oil field.
___ 8. An interest rate swap to synthetically convert floating rate interest on a stock
investment into fixed rate interest.
___ 9. An interest rate swap to synthetically convert fixed rate interest on a held-to-maturity
debt investment into floating rate interest.
___ 10. An interest rate swap to synthetically convert floating rate interest on a held-tomaturity debt investment into fixed rate interest.
___ 11. An interest rate swap to synthetically convert fixed rate interest on a stock investment
into floating rate interest.
VI.
VII.
VIII.

Define Derivative.
Three types of Derivatives and provide a brief description
Purpose of derivatives.