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ARM 401 - Chapter 9 Exam Questions with Correct Answers
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ARM 401 - Chapter 9 Exam Questions with Correct Answers
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ARM 401 - Chapter 9 Exam Questions with CorrectAnswers
Market Risk - Answer - Uncertainty about an investment's future value because of potential changes in
the market for that type of investment.
Interest Rate Risk - Answer - The risk that a security's future value will decline because of changes in
interest rates.
Exchange Rate Risk - Answer - Uncertainty about an investment's value because of potential changes in
the exchange rate between currencies.
Liquidity Risk - Answer - The risk that an asset cannot be sold on short notice without incurring a loss.
Forward Contract - Answer - A contract that obligates one party to buy and another party to sell a
specific financial instrument or physical commodity at a specified future date and price.
Credit Risk - Answer - The risk that customers or other creditors will fail to make promised payments as
they come due.
Counterparty Risk - Answer - The risk that the other party to an agreement will default.
Price Risk - Answer - The potential for a change in revenue or cost because of an increase or a decrease
in the price of a product or an input.
Balance Sheet - Answer - a snapshot of a business's financial position at a particular moment in time
Assets - Answer - the resources an organization owns or uses to operate its business.
Current Assets - Answer - cash and other assets that are expected to be converted to cash within a
year.
Noncurrent Assets - Answer - assets that will be used over a period greater than one year
Depreciation - Answer - an accounting term used to describe allocation of a noncurrent tangible asset's
value over its useful life.
Liabilities - Answer - the debts and obligations that represent claims against an organization's assets.
Shareholders' Equity - Answer - the net amount of assets after deducting an organization's debts and
obligations (liabilities)
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