Question

Which of the following is NOT true?

       In evaluating the pros and cons of corporate risk management, "market imperfections" refer to management costs, corporate costs, liquidity costs, and trading costs.
       In evaluating the pros and cons of corporate risk management, one argument against hedging is shareholders who are diversified have already managed their exchange rate risk.
       In evaluating the pros and cons of corporate risk management, "market imperfections" refer to information asymmetry, differential transaction costs, default costs, and progressive corporate taxes.

Answer 1

First statement is not True.

In evaluating the pros and cons of corporate risk management, "market imperfections" refer to information asymmetry, differential transaction costs, default costs, and progressive corporate taxes.These are problems in the market which increase the risk of corporate management.

In evaluating the pros and cons of corporate risk management, one argument against hedging is shareholders who are diversified have already managed their exchange rate risk. This statement is true.

Hence by elimination the first statement is false