FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 15: Futures and Risk Management

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Multiple Choice

Review LaterAdd Note

Review Later

If you expect a stock market downturn, one potential defensive strategy would be to ________.

A) buy stock index futures
B) sell stock index futures
C) buy stock index options
D) sell foreign exchange futures

E) None of the above
F) B) and C)

Correct Answer

verified

Show Answer

Question 2

Multiple Choice

Review LaterAdd Note

Review Later

A one-year gold futures contract is selling for $641. Spot gold prices are $600 and the one year risk free rate is 6%. The arbitrage profit implied by these prices is ________.

A) $3
B) $4
C) $5
D) $6

E) A) and C)
F) None of the above

Correct Answer

verified

C

Question 3

Multiple Choice

Review LaterAdd Note

On Monday morning you sell one June T-bond futures contract at 97: 27 or for $97 843.75. The contract's face value is $100 000. The initial margin requirement is $2 700 and the maintenance margin requirement is $2 000 per contract. Use the following price data to answer the question. On which of the given days do you get a margin call?

Futures contracts are said to exhibit the property of convergence because ________.

Forward contracts ________ traded on an organised exchange and futures contracts ________ traded on an organised exchange.

Sahali Trading Company has issued $100 million worth of long-term bonds at a fixed rate of 9%. Sahali Trading Company then enters into an interest rate swap where they will pay LIBOR and receive a fixed 8.00% on a notional principal of $100 million. After all these transactions are considered, Sahali's cost of funds is ________.

Futures contracts have many advantages over forward contracts except that ________.

You purchase an interest rate futures contract that has an initial margin requirement of 15% and a futures price of $115 098. The contract has a $100 000 underlying par value bond. If the futures price falls to $108 000 you will experience a ________ per cent loss on your money invested.

On 1 January you sold one April S&P 500 index futures contract at a futures price of 1300. If the April futures price is 1250 on 1 February, your profit would be ________ if you close your position. (The contract multiplier is 250.)

Which one of the following contracts requires no cash to change hands when initiated?

On Monday morning you sell one June T-bond futures contract at 97: 27 or for $97 843.75. The contract's face value is $100 000. The initial margin requirement is $2 700 and the maintenance margin requirement is $2 000 per contract. Use the following price data to answer the question. Your cumulative rate of return on your investment after Wednesday is a/an ________.

An investor who goes short in a futures contract will ________ any increase in value of the underlying asset and will ________ any decrease in value in the underlying asset.

The advantage that standardisation of futures contracts brings is that ________ is improved because ________.

A company which mines bauxite decides to short aluminum futures. This is an example of ________ to limit its risk.

Violation of the spot-futures parity relationship results in ________.

An investor who is hedging a corporate bond portfolio using a T-bond futures contract is said to have a(n) ________.

Synthetic stock positions are commonly used by ________ because of their ________.

You take a long position in a futures contract of one maturity and a short position in a contract of a different maturity, both on the same commodity. This is called ________.

Which one of the following refers to the daily settlement of obligations on future positions?

A person with a long position in a commodity futures contract wants the price of the commodity to ________.