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5. Financial derivatives A) are only used by foreign currency traders to speculate on currency fluctuations. B) are generally legal contracts or exchange traded securities that are designed to transfer risk for a price. C) generally involve three parties. D) Both B and C are true 6. If a comparty reports a payable denominated in Euros () and the SUS weakens vis--vis the Euro A) the company will not report the change in the relative value of the payable until the B) the company will accrue the gain in its financial statements as of the statement date C) the company will accrue the loss in its financial statements as of the statement date D) the company will recognize the increase in the SUS value of the payable on its payable is paid. even before the payable is paid. even before the payable is paid. balance sheet as of the statement date, but the unrealized loss will not be recognized in its income statement until the payable is paid. 7. An option contract A) requires a relatively large up-front payment and are, therefore, rarely used in practice. B) has an intrinsic value that is never less than zero. C) has an intrinsic value that decreases with time to maturity D) gives a party the obligation to execute a transaction. 8. Which of the following is not a characteristic of a derivative? A) A contract that has one or more underlyings B) A contract that permits net settlement C) A contract that does not permit net settlement D) It is a financial instrument. 5. Financial derivatives A) are only used by foreign currency traders to speculate on currency fluctuations. B) are generally legal contracts or exchange traded securities that are designed to transfer risk for a price. C) generally involve three parties. D) Both B and C are true 6. If a comparty reports a payable denominated in Euros () and the SUS weakens vis--vis the Euro A) the company will not report the change in the relative value of the payable until the B) the company will accrue the gain in its financial statements as of the statement date C) the company will accrue the loss in its financial statements as of the statement date D) the company will recognize the increase in the SUS value of the payable on its payable is paid. even before the payable is paid. even before the payable is paid. balance sheet as of the statement date, but the unrealized loss will not be recognized in its income statement until the payable is paid. 7. An option contract A) requires a relatively large up-front payment and are, therefore, rarely used in practice. B) has an intrinsic value that is never less than zero. C) has an intrinsic value that decreases with time to maturity D) gives a party the obligation to execute a transaction. 8. Which of the following is not a characteristic of a derivative? A) A contract that has one or more underlyings B) A contract that permits net settlement C) A contract that does not permit net settlement D) It is a financial instrument