1. Which Statement is correct?
a. Speculators make money by setting up transactions and are the go between in the derivatives market.
b. A firm should always hedge in order to reduce risk whenever they can
c. Dealers do not mind losing money as long as they are reducing their risk
d. Arbitrageurs try to find mispricings in the market where they can buy at a low price and simultaneously sell at a high price without taking on any risk.
2. Which of the following is NOT correct?
a. An increase in dividends would result in lower debt ratios
b. Capital Expenditures increase the firm’s Fixed Assets
c. Off balance sheet financing results in lower debt ratios
d. Depreciation is a source of funds