1) The decision to develop undeveloped resources resembles a call option, where the strike price in this valuation model is:

a.The exploration cost

b.The initial cost of developing the resources

c.Estimated value of resources

d.Payoff on investment

e.none of the above

2)

A mining firm has recently discovered new reserves worth $600 million. If the cost of developing these reserves is $500 million, what is the payoff to the firm if it has decided to develop these reserves:

a.$600 million

b.$100 million

c.$1,100 million

d.-$100 million

e.none of the above

3)

Resource firms differ from other industrial firms in the following area(s),except:

a.have a greater stock price volatility especially in the short run

b.have a greater capital intensity

c.have a greater commodity price volatility

d.have a greater return in the short run

e.none of the above

4)

Foreign currency transaction exposure arises when:

a.The transaction date and payment date are different.

b.The transaction date and payment date are the same.

c.An overseas subsidiary conduct business in the overseas foreign currency

d.The parent firm conducts its business in its local currency without hedging

e.none of the above