Question 1

If an individual has a long position in bond futures, that investor is anticipating lower interest rates.

Accepted Answer

A) True 
 B)False  True

Question 2

The Futures Trading Commission enforces the federal laws regulating commodity transactions.

Accepted Answer

A) True 
 B)False  True

Question 3

If the commodity's futures price declines
1. the long position profits
2. the short position profits
3. the buyer of the contract profits
4. the seller of the contract profits

Accepted Answer

A) 1 and 3 
B) 1 and 4 
C) 2 and 3 
D) 2 and 4 
A) 1 and 3 
B) 1 and 4 
C) 2 and 3 
D) 2 and 4 D

Question 4

Since there are many grades of corn, the seller of a futures contract may deliver any type of corn.

Accepted Answer

A) True 
 B)False

Question 5

A position in a futures contract is canceled (offset)by entering into the opposite position.

Accepted Answer

A) True 
 B)False

Question 6

Speculators take the opposite positions of hedgers.

Accepted Answer

A) True 
 B)False

Question 7

An individual with a large stock portfolio can hedge the position by

Accepted Answer

A) entering a stock index futures to buy 
B) entering a stock index futures to sell 
C) selling the stocks 
D) maintaining the positions 
A) entering a stock index futures to buy 
B) entering a stock index futures to sell 
C) selling the stocks 
D) maintaining the positions

Question 8

When an investor sells a contract and subsequently offsets (closes)the position, the individual experiences neither losses nor profits.

Accepted Answer

A) True 
 B)False

Question 9

One use for futures markets is "price discovery," that is, the future price mirrors the current consensus of the future price. If the current price of corn is $2.00 a bushel and the cost of carry is 7 percent, explain what an investor would do if futures price of wheat were $2.40. Is the investor at risk?

Accepted Answer

The investor buys the wheat for $2.00 an

Question 10

A swap agreement may be used by a financial manager to reduce risk exposure.

Accepted Answer

A) True 
 B)False

Question 11

A swap agreement converts a futures contract into a spot contract.

Accepted Answer

A) True 
 B)False

Question 12

A swap agreement may be used to convert

Accepted Answer

A) variable payments into fixed payments 
B) short-term gains into long-term gains 
C) bonds into stock 
D) futures prices into spot prices 
A) variable payments into fixed payments 
B) short-term gains into long-term gains 
C) bonds into stock 
D) futures prices into spot prices

Question 13

If an investor has a short position in corn, the position is closed by buying corn.

Accepted Answer

A) True 
 B)False

Question 14

If a speculator is short and the price of the commodity rises, the individual
1. can expect a margin call
2. may take profits out of the position
3. may close the position at a loss

Accepted Answer

A) 1 and 2 
B) 1 and 3 
C) 2 and 3 
D) all of the above 
A) 1 and 2 
B) 1 and 3 
C) 2 and 3 
D) all of the above

Question 15

Programmed trading (index arbitrage)transfers changes in the futures markets to the stock markets.

Accepted Answer

A) True 
 B)False

Question 16

Investing in futures contracts is considered to be among the riskiest of all investment alternatives.

Accepted Answer

A) True 
 B)False

Question 17

Investors acquiring gold futures contracts

Accepted Answer

A) do not have to meet margin requirements 
B) may anticipate an increase in inflation 
C) are considered to have unleveraged positions 
D) have less speculative positions 
A) do not have to meet margin requirements 
B) may anticipate an increase in inflation 
C) are considered to have unleveraged positions 
D) have less speculative positions

Question 18

The investor must maintain a minimum amount of equity (i.e., maintenance margin)to maintain a futures position.

Accepted Answer

A) True 
 B)False

Question 19

A farmer hedges by simultaneously buying and selling futures contracts.

Accepted Answer

A) True 
 B)False

Question 20

If an investor expects the stock market to rise, that individual enters into a short position in stock index futures.

Accepted Answer

A) True 
 B)False

If an individual has a long position in bond futures, that investor is anticipating lower interest rates.

The Futures Trading Commission enforces the federal laws regulating commodity transactions.

If the commodity's futures price declines 1. the long position profits 2. the short position profits 3. the buyer of the contract profits 4. the seller of the contract profits

Since there are many grades of corn, the seller of a futures contract may deliver any type of corn.

A position in a futures contract is canceled (offset)by entering into the opposite position.

Speculators take the opposite positions of hedgers.

An individual with a large stock portfolio can hedge the position by

When an investor sells a contract and subsequently offsets (closes)the position, the individual experiences neither losses nor profits.

A swap agreement may be used by a financial manager to reduce risk exposure.

A swap agreement converts a futures contract into a spot contract.

A swap agreement may be used to convert

If an investor has a short position in corn, the position is closed by buying corn.

If a speculator is short and the price of the commodity rises, the individual 1. can expect a margin call 2. may take profits out of the position 3. may close the position at a loss

Programmed trading (index arbitrage)transfers changes in the futures markets to the stock markets.

Investing in futures contracts is considered to be among the riskiest of all investment alternatives.

Investors acquiring gold futures contracts

The investor must maintain a minimum amount of equity (i.e., maintenance margin)to maintain a futures position.

A farmer hedges by simultaneously buying and selling futures contracts.

If an investor expects the stock market to rise, that individual enters into a short position in stock index futures.

An Introduction to Investments

Securities Markets

The Time Value of Money

Financial Planning, Taxation and the Efficiency of Financial Markets

Risk and Portfolio Management

Investment Companies: Mutual Funds

Closed-End Investment Companies, Real Estate Investment Trusts Reits, and Exchange-Traded Funds Etfs

Stock

The Valuation of Common Stock

Investment Returns and Aggregate Measures of Stock Markets

The Macroeconomic Environment for Investment Decisions

Behavioral Finance and Technical Analysis

The Bond Market

The Valuation of Fixed-Income Securities

Government Securities

Convertible Bonds and Convertible Preferred Stock

An Introduction to Options

Option Valuation and Strategies

Financial Planning and Investing in an Efficient Market Context

Filters

Exam 19: Commodity and Financial Futures

If an individual has a long position in bond futures, that investor is anticipating lower interest rates.

The Futures Trading Commission enforces the federal laws regulating commodity transactions.

If the commodity's futures price declines 1. the long position profits 2. the short position profits 3. the buyer of the contract profits 4. the seller of the contract profits

Since there are many grades of corn, the seller of a futures contract may deliver any type of corn.

A position in a futures contract is canceled (offset)by entering into the opposite position.

Speculators take the opposite positions of hedgers.

An individual with a large stock portfolio can hedge the position by

When an investor sells a contract and subsequently offsets (closes)the position, the individual experiences neither losses nor profits.

A swap agreement may be used by a financial manager to reduce risk exposure.

A swap agreement converts a futures contract into a spot contract.

A swap agreement may be used to convert

If an investor has a short position in corn, the position is closed by buying corn.

If a speculator is short and the price of the commodity rises, the individual 1. can expect a margin call 2. may take profits out of the position 3. may close the position at a loss

Programmed trading (index arbitrage)transfers changes in the futures markets to the stock markets.

Investing in futures contracts is considered to be among the riskiest of all investment alternatives.

Investors acquiring gold futures contracts

The investor must maintain a minimum amount of equity (i.e., maintenance margin)to maintain a futures position.

A farmer hedges by simultaneously buying and selling futures contracts.

If an investor expects the stock market to rise, that individual enters into a short position in stock index futures.

An Introduction to Investments

Securities Markets

The Time Value of Money

Financial Planning, Taxation and the Efficiency of Financial Markets

Risk and Portfolio Management

Investment Companies: Mutual Funds

Closed-End Investment Companies, Real Estate Investment Trusts Reits, and Exchange-Traded Funds Etfs

Stock

The Valuation of Common Stock

Investment Returns and Aggregate Measures of Stock Markets

The Macroeconomic Environment for Investment Decisions

Behavioral Finance and Technical Analysis

The Bond Market

The Valuation of Fixed-Income Securities

Government Securities

Convertible Bonds and Convertible Preferred Stock

An Introduction to Options

Option Valuation and Strategies

Financial Planning and Investing in an Efficient Market Context

Filters