Question 1

Options on futures contracts are referred to as ________.

Accepted Answer

A) stock options 
B) futures options 
C) American options 
D) individual options 
A) stock options 
B) futures options 
C) American options 
D) individual options

Question 2

if you buy an option to sell Canada futures at 115, and at expiration the market price is 110, ________.

Accepted Answer

A) the call will be exercised 
B) the put will be exercised 
C) the call will not be exercised 
D) the put will not be exercised 
A) the call will be exercised 
B) the put will be exercised 
C) the call will not be exercised 
D) the put will not be exercised

Question 3

If you buy in March a bond future contract for 97 that matures on June 30 of the same year, and at the maturity date the same future sells for 93, you have a ________ of $________.

Accepted Answer

A) loss; 4000 
B) loss; 4 
C) profit; 4000 
D) profit; 4 
A) loss; 4000 
B) loss; 4 
C) profit; 4000 
D) profit; 4

Question 4

If you sell in March a bond future contract for 125 that matures on June 30 of the same year, and at the maturity date the same future sells for 135, you have a ________ of $________.

Accepted Answer

A) loss; 10000 
B) loss; 10 
C) profit; 10000 
D) profit; 10 
A) loss; 10000 
B) loss; 10 
C) profit; 10000 
D) profit; 10

Question 5

All other things held constant, premiums on call options will increase when the ________.

Accepted Answer

A) exercise price falls 
B) volatility of the underlying asset falls 
C) term to maturity decreases 
D) futures price increases 
A) exercise price falls 
B) volatility of the underlying asset falls 
C) term to maturity decreases 
D) futures price increases

Question 6

Options on individual stocks are referred to as ________.

Accepted Answer

A) stock options 
B) futures options 
C) American options 
D) individual options 
A) stock options 
B) futures options 
C) American options 
D) individual options

Question 7

The main disadvantage of futures contracts as compared to options on futures contracts is that futures ________.

Accepted Answer

A) remove the possibility of gains 
B) increase the transactions cost 
C) are not as effective a hedge 
D) do not remove the possibility of losses 
A) remove the possibility of gains 
B) increase the transactions cost 
C) are not as effective a hedge 
D) do not remove the possibility of losses

Question 8

The seller of an option has the ________.

Accepted Answer

A) right to buy or sell the underlying asset 
B) the obligation to buy or sell the underlying asset 
C) ability to reduce transaction risk 
D) right to exchange one payment stream for another 
A) right to buy or sell the underlying asset 
B) the obligation to buy or sell the underlying asset 
C) ability to reduce transaction risk 
D) right to exchange one payment stream for another

Question 9

If you buy in February a bond future contract for 125 that matures on June 30 of the same year, and at the maturity date the same future sells for 105, you have a ________ of $________.

Accepted Answer

A) loss; 20000 
B) loss; 20 
C) profit; 20000 
D) profit; 20 
A) loss; 20000 
B) loss; 20 
C) profit; 20000 
D) profit; 20

Question 10

A contract that requires the investor to sell securities on a future date is called a ________.

Accepted Answer

A) short position 
B) long position 
C) hedge 
D) micro hedge 
A) short position 
B) long position 
C) hedge 
D) micro hedge

Question 11

If you buy a European call option on Canada bonds with a strike price of 115 assuming that the premium is $0, and on the maturity date the market price of Canada bonds is 120, you will ________ the option in order to make a profit of $________.

Accepted Answer

A) not exercise; 5000 
B) not exercise; 5 
C) exercise; 5000 
D) exercise; 5 
A) not exercise; 5000 
B) not exercise; 5 
C) exercise; 5000 
D) exercise; 5

Question 12

If you buy a European call option on Canada bonds with a strike price of 120 assuming that the premium is $0, and on the maturity date the market price of Canada bonds is 117, you will ________ the option and potentially make a profit of $________.

Accepted Answer

A) not exercise; 3000 
B) not exercise; 3 
C) exercise; 3000 
D) exercise; 3 
A) not exercise; 3000 
B) not exercise; 3 
C) exercise; 3000 
D) exercise; 3

Question 13

By selling short a futures contract of $100,000 at a price of 96, you are agreeing to deliver ________.

Accepted Answer

A) $100,000 face value securities for $104,167 
B) $96000 face value securities for $100,000 
C) $100,000 face value securities for $96000 
D) 100,000 face value securities for $100,000 
A) $100,000 face value securities for $104,167 
B) $96000 face value securities for $100,000 
C) $100,000 face value securities for $96000 
D) 100,000 face value securities for $100,000

Question 14

If you buy in March a bond future contract for 115 that matures on June 30 of the same year, and at the maturity date the same future sells for 110, you have a ________ of $________.

Accepted Answer

A) loss; 5000 
B) loss; 5 
C) profit; 5000 
D) profit; 5 
A) loss; 5000 
B) loss; 5 
C) profit; 5000 
D) profit; 5

Question 15

if you sell a futures contract on the S&P 500 Index at a price of 450 and the index rises to 500, you will ________.

Accepted Answer

A) lose $12500 
B) gain $12500 
C) lose $50 
D) gain $50 
A) lose $12500 
B) gain $12500 
C) lose $50 
D) gain $50

Question 16

Futures differ from forwards because they are ________.

Accepted Answer

A) used to hedge portfolios 
B) used to hedge individual securities 
C) used in both financial and foreign exchange markets 
D) standardized contracts 
A) used to hedge portfolios 
B) used to hedge individual securities 
C) used in both financial and foreign exchange markets 
D) standardized contracts

Question 17

If you sell in April a stock index future contract on the S&P 500 index at the price of 1050 points that matures on June 30 of the same year and on the maturity date the S&P 500 Index is at 1047, you have a ________ of $________.

Accepted Answer

A) loss; 750 
B) loss; 3 
C) profit; 750 
D) profit; 3 
A) loss; 750 
B) loss; 3 
C) profit; 750 
D) profit; 3

Question 18

A call option gives the seller ________.

Accepted Answer

A) the right to sell the underlying security 
B) the obligation to sell the underlying security 
C) the right to buy the underlying security 
D) the obligation to buy the underlying security 
A) the right to sell the underlying security 
B) the obligation to sell the underlying security 
C) the right to buy the underlying security 
D) the obligation to buy the underlying security

Question 19

What are options? What are their differences from futures contracts?

Accepted Answer

Options are contracts that give the purc

Question 20

If you sell in March a bond future contract for 97 that matures on June 30 of the same year, and at the maturity date the same future sells for 93, you have a ________ of $________.

Accepted Answer

A) loss; 4000 
B) loss; 4 
C) profit; 4000 
D) profit; 4 
A) loss; 4000 
B) loss; 4 
C) profit; 4000 
D) profit; 4

Exam 13: Risk Management With Financial Derivatives

Options on futures contracts are referred to as ________.

if you buy an option to sell Canada futures at 115, and at expiration the market price is 110, ________.

If you buy in March a bond future contract for 97 that matures on June 30 of the same year, and at the maturity date the same future sells for 93, you have a ________ of $________.

If you sell in March a bond future contract for 125 that matures on June 30 of the same year, and at the maturity date the same future sells for 135, you have a ________ of $________.

All other things held constant, premiums on call options will increase when the ________.

Options on individual stocks are referred to as ________.

The main disadvantage of futures contracts as compared to options on futures contracts is that futures ________.

The seller of an option has the ________.

If you buy in February a bond future contract for 125 that matures on June 30 of the same year, and at the maturity date the same future sells for 105, you have a ________ of $________.

A contract that requires the investor to sell securities on a future date is called a ________.

If you buy a European call option on Canada bonds with a strike price of 115 assuming that the premium is $0, and on the maturity date the market price of Canada bonds is 120, you will ________ the option in order to make a profit of $________.

If you buy a European call option on Canada bonds with a strike price of 120 assuming that the premium is $0, and on the maturity date the market price of Canada bonds is 117, you will ________ the option and potentially make a profit of $________.

By selling short a futures contract of $100,000 at a price of 96, you are agreeing to deliver ________.

If you buy in March a bond future contract for 115 that matures on June 30 of the same year, and at the maturity date the same future sells for 110, you have a ________ of $________.

if you sell a futures contract on the S&P 500 Index at a price of 450 and the index rises to 500, you will ________.

Futures differ from forwards because they are ________.

If you sell in April a stock index future contract on the S&P 500 index at the price of 1050 points that matures on June 30 of the same year and on the maturity date the S&P 500 Index is at 1047, you have a ________ of $________.

A call option gives the seller ________.

What are options? What are their differences from futures contracts?

If you sell in March a bond future contract for 97 that matures on June 30 of the same year, and at the maturity date the same future sells for 93, you have a ________ of $________.

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behaviour 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

Financial Crises

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Banking and the Management of Financial Institutions

Central Banks and the Bank of Canada

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

Financial Crises in Emerging Markets

The ISLM Model

Non-Bank Finance

Filters

If you buy in March a bond future contract for 97 that matures on June 30 of the same year, and at the maturity date the same future sells for 93, you have a of $.

If you sell in March a bond future contract for 125 that matures on June 30 of the same year, and at the maturity date the same future sells for 135, you have a of $.

If you buy in February a bond future contract for 125 that matures on June 30 of the same year, and at the maturity date the same future sells for 105, you have a of $.

If you buy a European call option on Canada bonds with a strike price of 115 assuming that the premium is $0, and on the maturity date the market price of Canada bonds is 120, you will the option in order to make a profit of $.

If you buy a European call option on Canada bonds with a strike price of 120 assuming that the premium is $0, and on the maturity date the market price of Canada bonds is 117, you will the option and potentially make a profit of $.

If you buy in March a bond future contract for 115 that matures on June 30 of the same year, and at the maturity date the same future sells for 110, you have a of $.

If you sell in April a stock index future contract on the S&P 500 index at the price of 1050 points that matures on June 30 of the same year and on the maturity date the S&P 500 Index is at 1047, you have a of $.

If you sell in March a bond future contract for 97 that matures on June 30 of the same year, and at the maturity date the same future sells for 93, you have a of $.