Question 1

What is the focus of speculators who spread stock-index futures?

Accepted Answer

Stock-index spreaders think that the pri

Question 2

The National Futures Association is the federal agency which regulates the futures markets.

Accepted Answer

A) True 
 B)False

Question 3

The difference between the cash price and the futures price on the same asset or commodity is known as the:

Accepted Answer

A) basis. 
B) spread. 
C) yield spread. 
D) premium. 
A) basis. 
B) spread. 
C) yield spread. 
D) premium.

Question 4

One difference between a hedger and a speculator is that the hedger:

Accepted Answer

A) may experience either a profit or a loss. 
B) may not close out his position by taking an opposite position. 
C) does not have to put up margin. 
D) faces a risk without the futures contract. 
A) may experience either a profit or a loss. 
B) may not close out his position by taking an opposite position. 
C) does not have to put up margin. 
D) faces a risk without the futures contract.

Question 5

The calendar or time spread is also known as the intramarket spread,and involves contracts for two different settlement months,such as buying a March contract and selling a June contract.

Accepted Answer

A) True 
 B)False

Question 6

?Stock-index futures may be settled either by cash or by delivery of securities.

Accepted Answer

A) True 
 B)False

Question 7

Stock-index futures can be used to hedge against which of the following types of risks?

Accepted Answer

A) Diversifiable risk 
B) Systematic risk 
C) Unsystematic risk 
D) Company specific risk 
A) Diversifiable risk 
B) Systematic risk 
C) Unsystematic risk 
D) Company specific risk

Question 8

Investors can speculate on interest rate declines by purchasing interest rate futures.

Accepted Answer

A) True 
 B)False

Question 9

In the case of a futures contract,buyers can settle a contract:

Accepted Answer

A) only by taking delivery. 
B) only by arranging an offsetting contract. 
C) either by delivery or offset. 
D) by a combination of delivery and offset. 
A) only by taking delivery. 
B) only by arranging an offsetting contract. 
C) either by delivery or offset. 
D) by a combination of delivery and offset.

Question 10

Which of the following is not a potential advantage of speculating in futures?

Accepted Answer

A) Leverage 
B) Ease of transacting 
C) Low transactions costs 
D) High and narrow probability distribution of expected returns 
A) Leverage 
B) Ease of transacting 
C) Low transactions costs 
D) High and narrow probability distribution of expected returns

Question 11

What is meant by the term "marked to market"?

Accepted Answer

All profits and losses are credited and

Question 12

Futures exchanges standardize nonstandard forward contracts,establishing such features as contract size,delivery dates,and grades that can be delivered.Only the price and number of contracts are left for futures traders to negotiate.

Accepted Answer

A) True 
 B)False

Question 13

Interest rate futures are not currently available on which of the following securities?

Accepted Answer

A) Corporate bonds 
B) Treasury notes 
C) One-month LIBOR rate 
D) Eurodollars 
A) Corporate bonds 
B) Treasury notes 
C) One-month LIBOR rate 
D) Eurodollars

Question 14

A futures contract is:

Accepted Answer

A) a negotiable,nonmarketable instrument. 
B) a security,like a stock or bond. 
C) a standardized,transferable agreement providing for deferred delivery of an asset. 
D) not a legal contract,and therefore its terms can be changed. 
A) a negotiable,nonmarketable instrument. 
B) a security,like a stock or bond. 
C) a standardized,transferable agreement providing for deferred delivery of an asset. 
D) not a legal contract,and therefore its terms can be changed.

Question 15

Program trading generally involves positions in both stocks and stock-index futures.

Accepted Answer

A) True 
 B)False

Question 16

An anticipatory hedge is when an investor anticipates a falling market and liquidates his position.

Accepted Answer

A) True 
 B)False

Question 17

The forward price is:

Accepted Answer

A) the price agreed upon today for deferred delivery of an asset. 
B) the spot price of an asset at the time it is delivered in the future. 
C) the future value of the spot price of an asset. 
D) a multiple of the current spot market price. 
A) the price agreed upon today for deferred delivery of an asset. 
B) the spot price of an asset at the time it is delivered in the future. 
C) the future value of the spot price of an asset. 
D) a multiple of the current spot market price.

Question 18

Japan,which banned financial futures in 1985,is now very active in developing futures exchanges.

Accepted Answer

A) True 
 B)False

Question 19

Approximately what percentage of futures contracts are offset prior to delivery?

Accepted Answer

A) 25 
B) 50 
C) 75 
D) 95 
A) 25 
B) 50 
C) 75 
D) 95

Question 20

Are futures - commodity,interest-rate,stock-index,or currency - appropriate for most individual investors?

Accepted Answer

Futures are appropriate for sophisticate

Exam 20: Futures

What is the focus of speculators who spread stock-index futures?

The National Futures Association is the federal agency which regulates the futures markets.

The difference between the cash price and the futures price on the same asset or commodity is known as the:

One difference between a hedger and a speculator is that the hedger:

The calendar or time spread is also known as the intramarket spread,and involves contracts for two different settlement months,such as buying a March contract and selling a June contract.

?Stock-index futures may be settled either by cash or by delivery of securities.

Stock-index futures can be used to hedge against which of the following types of risks?

Investors can speculate on interest rate declines by purchasing interest rate futures.

In the case of a futures contract,buyers can settle a contract:

Which of the following is not a potential advantage of speculating in futures?

What is meant by the term "marked to market"?

Futures exchanges standardize nonstandard forward contracts,establishing such features as contract size,delivery dates,and grades that can be delivered.Only the price and number of contracts are left for futures traders to negotiate.

Interest rate futures are not currently available on which of the following securities?

A futures contract is:

Program trading generally involves positions in both stocks and stock-index futures.

An anticipatory hedge is when an investor anticipates a falling market and liquidates his position.

The forward price is:

Japan,which banned financial futures in 1985,is now very active in developing futures exchanges.

Approximately what percentage of futures contracts are offset prior to delivery?

Are futures - commodity,interest-rate,stock-index,or currency - appropriate for most individual investors?

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