Question 1

The most common type of interest-rate swap is

Accepted Answer

A) the plain vanilla swap. 
B) the basic swap. 
C) the ordinary swap. 
D) the notional swap. 
A) the plain vanilla swap. 
B) the basic swap. 
C) the ordinary swap. 
D) the notional swap.

Question 2

One advantage of using swaps to eliminate interest-rate risk is that swaps

Accepted Answer

A) are less costly than futures. 
B) are less costly than rearranging balance sheets. 
C) are more liquid than futures. 
D) have better accounting treatment than options. 
A) are less costly than futures. 
B) are less costly than rearranging balance sheets. 
C) are more liquid than futures. 
D) have better accounting treatment than options.

Question 3

A swap that involves the exchange of a set of payments in one currency for a set of payments in another currency is

Accepted Answer

A) an interest-rate swap. 
B) a currency swap. 
C) a swaption. 
D) an international swap. 
A) an interest-rate swap. 
B) a currency swap. 
C) a swaption. 
D) an international swap.

Question 4

If you purchase a $100,000 interest-rate futures contract for 105,and the price of the Treasury securities on the expiration date is 108,your ________ is ________.

Accepted Answer

A) profit;$3000 
B) loss;$3000 
C) profit;$8000 
D) loss;$8000 
A) profit;$3000 
B) loss;$3000 
C) profit;$8000 
D) loss;$8000

Question 5

An option that gives the owner the right to buy a financial instrument at the exercise price within a specified period of time is a

Accepted Answer

A) call option. 
B) put option. 
C) American option. 
D) European option. 
A) call option. 
B) put option. 
C) American option. 
D) European option.

Question 6

Elimination of riskless profit opportunities in the futures market is

Accepted Answer

A) hedging. 
B) arbitrage. 
C) speculation. 
D) underwriting. 
A) hedging. 
B) arbitrage. 
C) speculation. 
D) underwriting.

Question 7

If,for a $1000 premium,you buy a $100,000 call option on bond futures with a strike price of 110,and at the expiration date the price is 114,your ________ is ________.

Accepted Answer

A) profit;$4000 
B) loss;$4000 
C) profit;$3000 
D) loss;$3000 
A) profit;$4000 
B) loss;$4000 
C) profit;$3000 
D) loss;$3000

Question 8

A financial contract that obligates one party to exchange a set of payments it owns for another set of payments owned by another party is called a

Accepted Answer

A) hedge. 
B) call option. 
C) put option. 
D) swap. 
A) hedge. 
B) call option. 
C) put option. 
D) swap.

Question 9

Assume you are holding Treasury securities and have sold futures to hedge against interest-rate risk.If interest rates rise

Accepted Answer

A) the increase in the value of the securities equals the decrease in the value of the futures contracts. 
B) the decrease in the value of the securities equals the increase in the value of the futures contracts. 
C) both the securities and the futures contracts decrease in value. 
D) both the securities and the futures contracts increase in value. 
A) the increase in the value of the securities equals the decrease in the value of the futures contracts. 
B) the decrease in the value of the securities equals the increase in the value of the futures contracts. 
C) both the securities and the futures contracts decrease in value. 
D) both the securities and the futures contracts increase in value.

Question 10

The main advantage of using options on futures contracts rather than the futures contracts themselves is that interest-rate risk is

Accepted Answer

A) controlled while preserving the possibility of gains. 
B) controlled,while removing the possibility of losses. 
C) not controlled,but the possibility of gains is preserved. 
D) not controlled,but the possibility of gains is lost. 
A) controlled while preserving the possibility of gains. 
B) controlled,while removing the possibility of losses. 
C) not controlled,but the possibility of gains is preserved. 
D) not controlled,but the possibility of gains is lost.

The most common type of interest-rate swap is

One advantage of using swaps to eliminate interest-rate risk is that swaps

A swap that involves the exchange of a set of payments in one currency for a set of payments in another currency is

If you purchase a $100,000 interest-rate futures contract for 105,and the price of the Treasury securities on the expiration date is 108,your is .

An option that gives the owner the right to buy a financial instrument at the exercise price within a specified period of time is a

Elimination of riskless profit opportunities in the futures market is

If,for a $1000 premium,you buy a $100,000 call option on bond futures with a strike price of 110,and at the expiration date the price is 114,your is .

A financial contract that obligates one party to exchange a set of payments it owns for another set of payments owned by another party is called a

Assume you are holding Treasury securities and have sold futures to hedge against interest-rate risk.If interest rates rise

The main advantage of using options on futures contracts rather than the futures contracts themselves is that interest-rate risk is

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Meaning of Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Web 1:financial Crises in Emerging Market Economies

Web 2:the Islm Model

Web 3:nonbank Finance

Web 5:conflicts of Interest in the Financial Services Industry

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Exam 29: Web 4:financial Derivatives

The most common type of interest-rate swap is

One advantage of using swaps to eliminate interest-rate risk is that swaps

A swap that involves the exchange of a set of payments in one currency for a set of payments in another currency is

If you purchase a $100,000 interest-rate futures contract for 105,and the price of the Treasury securities on the expiration date is 108,your ________ is ________.

An option that gives the owner the right to buy a financial instrument at the exercise price within a specified period of time is a

Elimination of riskless profit opportunities in the futures market is

If,for a $1000 premium,you buy a $100,000 call option on bond futures with a strike price of 110,and at the expiration date the price is 114,your ________ is ________.

A financial contract that obligates one party to exchange a set of payments it owns for another set of payments owned by another party is called a

Assume you are holding Treasury securities and have sold futures to hedge against interest-rate risk.If interest rates rise

The main advantage of using options on futures contracts rather than the futures contracts themselves is that interest-rate risk is

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Meaning of Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Web 1:financial Crises in Emerging Market Economies

Web 2:the Islm Model

Web 3:nonbank Finance

Web 5:conflicts of Interest in the Financial Services Industry

Filters

If you purchase a $100,000 interest-rate futures contract for 105,and the price of the Treasury securities on the expiration date is 108,your is .

If,for a $1000 premium,you buy a $100,000 call option on bond futures with a strike price of 110,and at the expiration date the price is 114,your is .