Question 1

If you determine that the DAX-30 Index futures is overpriced relative to the spot DAX-30 Index you could make an arbitrage profit by

Accepted Answer

A) buying all the stocks in the DAX-30 and selling put options on the DAX-30 Index. 
B) selling short all the stocks in the DAX-30 and buying DAX-30 futures. 
C) selling all the stocks in the DAX-30 and buying call options on the DAX-30 Index. 
D) selling DAX-30 Index futures and buying all the stocks in the DAX-30. 
A) buying all the stocks in the DAX-30 and selling put options on the DAX-30 Index. 
B) selling short all the stocks in the DAX-30 and buying DAX-30 futures. 
C) selling all the stocks in the DAX-30 and buying call options on the DAX-30 Index. 
D) selling DAX-30 Index futures and buying all the stocks in the DAX-30. D

Question 2

A decrease in the basis will __________ a long hedger and __________ a short hedger.

Accepted Answer

A) hurt; benefit 
B) hurt; hurt 
C) benefit; hurt 
D) benefit; benefit 
E) benefit; have no effect upon 
A) hurt; benefit 
B) hurt; hurt 
C) benefit; hurt 
D) benefit; benefit 
E) benefit; have no effect upon A

Question 3

The process of marking-to-market

Accepted Answer

A) posts gains or losses to each account daily. 
B) may result in margin calls. 
C) impacts only long positions. 
D) All of the options 
E) posts gains or losses to each account daily and may result in margin calls. 
A) posts gains or losses to each account daily. 
B) may result in margin calls. 
C) impacts only long positions. 
D) All of the options 
E) posts gains or losses to each account daily and may result in margin calls. E

Question 4

Agricultural futures contracts are actively traded on

Accepted Answer

A) soybeans. 
B) oats. 
C) wheat. 
D) soybeans and oats. 
E) All of the options 
A) soybeans. 
B) oats. 
C) wheat. 
D) soybeans and oats. 
E) All of the options

Question 5

Open interest includes

Accepted Answer

A) only contracts with a specified delivery date. 
B) the sum of short and long positions. 
C) the sum of short, long, and clearinghouse positions. 
D) the sum of long or short positions and clearinghouse positions. 
E) only long or short positions but not both. 
A) only contracts with a specified delivery date. 
B) the sum of short and long positions. 
C) the sum of short, long, and clearinghouse positions. 
D) the sum of long or short positions and clearinghouse positions. 
E) only long or short positions but not both.

Question 6

A trader who has a __________ position in wheat futures believes the price of wheat will __________ in the future.

Accepted Answer

A) long; increase 
B) long; decrease 
C) short; increase 
D) long; stay the same 
E) short; stay the same 
A) long; increase 
B) long; decrease 
C) short; increase 
D) long; stay the same 
E) short; stay the same

Question 7

In a futures contract the futures price is

Accepted Answer

A) determined by the buyer and the seller when the delivery of the commodity takes place. 
B) determined by the futures exchange. 
C) determined by the buyer and the seller when they initiate the contract. 
D) determined independently by the provider of the underlying asset. 
E) None of the options 
A) determined by the buyer and the seller when the delivery of the commodity takes place. 
B) determined by the futures exchange. 
C) determined by the buyer and the seller when they initiate the contract. 
D) determined independently by the provider of the underlying asset. 
E) None of the options

Question 8

Which of the following items is specified in a futures contract
I. The contract size
II. The maximum acceptable price range during the life of the contract
III. The acceptable grade of the commodity on which the contract is held
IV. The market price at expiration
V. The settlement price

Accepted Answer

A) I, II, and IV 
B) I, III, and V 
C) I and V 
D) I, IV, and V 
E) I, II, III, IV, and V 
A) I, II, and IV 
B) I, III, and V 
C) I and V 
D) I, IV, and V 
E) I, II, III, IV, and V

Question 9

You sold one oil future contract at $70 per barrel.What would be your profit (loss) at maturity if the oil spot price at that time is $73.12 per barrel Assume the contract size is 1,000 barrels and there are no transactions costs.

Accepted Answer

A) $3.12 profit 
B) $31.20 profit 
C) $3.12 loss 
D) $31.20 loss 
E) None of the options 
A) $3.12 profit 
B) $31.20 profit 
C) $3.12 loss 
D) $31.20 loss 
E) None of the options

Question 10

Which one of the following statements is true

Accepted Answer

A) The maintenance margin is the amount of money you post with your broker when you buy or sell a futures contract. 
B) If the value of the margin account falls below the maintenance margin requirement, the holder of the contract will receive a margin call. 
C) A margin deposit can only be met with cash. 
D) All futures contracts require the same margin deposit. 
E) The maintenance margin is set by the producer of the underlying asset. 
A) The maintenance margin is the amount of money you post with your broker when you buy or sell a futures contract. 
B) If the value of the margin account falls below the maintenance margin requirement, the holder of the contract will receive a margin call. 
C) A margin deposit can only be met with cash. 
D) All futures contracts require the same margin deposit. 
E) The maintenance margin is set by the producer of the underlying asset.

Question 11

If you determine that the DAX-30 Index futures is underpriced relative to the spot DAX-30 Index you could make an arbitrage profit by

Accepted Answer

A) buying all the stocks in the DAX-30 and selling put options on the DAX-30 Index. 
B) selling short all the stocks in the DAX-30 and buying DAX-30 futures. 
C) selling all the stocks in the DAX-30 and buying call options on the DAX-30 Index. 
D) buying DAX-30 Index futures and selling all the stocks in the DAX-30. 
E) None of the options 
A) buying all the stocks in the DAX-30 and selling put options on the DAX-30 Index. 
B) selling short all the stocks in the DAX-30 and buying DAX-30 futures. 
C) selling all the stocks in the DAX-30 and buying call options on the DAX-30 Index. 
D) buying DAX-30 Index futures and selling all the stocks in the DAX-30. 
E) None of the options

Question 12

Which of the following is true about profits from futures contracts

Accepted Answer

A) The person with the long position gets to decide whether to exercise the futures contract and will only do so if there is a profit to be made. 
B) It is possible for both the holder of the long position and the holder of the short position to earn a profit. 
C) The clearinghouse makes most of the profit. 
D) The amount that the holder of the long position gains must equal the amount that the holder of the short position loses. 
E) Holders of short positions can recognize profits by making delivery early. 
A) The person with the long position gets to decide whether to exercise the futures contract and will only do so if there is a profit to be made. 
B) It is possible for both the holder of the long position and the holder of the short position to earn a profit. 
C) The clearinghouse makes most of the profit. 
D) The amount that the holder of the long position gains must equal the amount that the holder of the short position loses. 
E) Holders of short positions can recognize profits by making delivery early.

Question 13

You purchased the following futures contract today at the settlement price listed in the Wall Street Journal.Answer the questions below regarding the contract.

Accepted Answer

@#IMG-DLM& - What is the total value of the future

Question 14

You sold one wheat future contract at $3.04 per bushel.What would be your profit (loss) at maturity if the wheat spot price at that time were $2.98 per bushel Assume the contract size is 5,000 ounces and there are no transactions costs.

Accepted Answer

A) $30 profit 
B) $300 profit 
C) $300 loss 
D) $30 loss 
A) $30 profit 
B) $300 profit 
C) $300 loss 
D) $30 loss

Question 15

Foreign currency futures contracts are actively traded on the

Accepted Answer

A) euro. 
B) British pound. 
C) drachma. 
D) euro and British pound. 
E) All of the options 
A) euro. 
B) British pound. 
C) drachma. 
D) euro and British pound. 
E) All of the options

Question 16

The buyer of a futures contract is said to have a __________ position, and the seller of a futures contract is said to have a __________ position in futures.

Accepted Answer

A) long; short 
B) long; long 
C) short; short 
D) short; long 
E) margined; long 
A) long; short 
B) long; long 
C) short; short 
D) short; long 
E) margined; long

Question 17

Financial futures contracts are actively traded on the following indices except

Accepted Answer

A) the All ordinary index. 
B) the DAX 30 Index. 
C) the CAC 40 Index. 
D) the Toronto 35 Index. 
E) All of the options 
A) the All ordinary index. 
B) the DAX 30 Index. 
C) the CAC 40 Index. 
D) the Toronto 35 Index. 
E) All of the options

Question 18

A trader who has a __________ position in oil futures believes the price of oil will __________ in the future.

Accepted Answer

A) short; increase 
B) long; increase 
C) short; stay the same 
D) long; stay the same 
A) short; increase 
B) long; increase 
C) short; stay the same 
D) long; stay the same

Question 19

To exploit an expected increase in interest rates, an investor would most likely

Accepted Answer

A) sell Treasury bond futures. 
B) take a long position in wheat futures. 
C) buy S&P 500 Index futures. 
D) take a long position in Treasury bond futures. 
E) None of the options 
A) sell Treasury bond futures. 
B) take a long position in wheat futures. 
C) buy S&P 500 Index futures. 
D) take a long position in Treasury bond futures. 
E) None of the options

Question 20

Agricultural futures contracts are actively traded on

Accepted Answer

A) milk. 
B) orange juice. 
C) lumber. 
D) milk and orange juice. 
E) All of the options 
A) milk. 
B) orange juice. 
C) lumber. 
D) milk and orange juice. 
E) All of the options

Exam 22: Futures Markets

If you determine that the DAX-30 Index futures is overpriced relative to the spot DAX-30 Index you could make an arbitrage profit by

A decrease in the basis will __________ a long hedger and __________ a short hedger.

The process of marking-to-market

Agricultural futures contracts are actively traded on

Open interest includes

A trader who has a __________ position in wheat futures believes the price of wheat will __________ in the future.

In a futures contract the futures price is

Which of the following items is specified in a futures contract I. The contract size II. The maximum acceptable price range during the life of the contract III. The acceptable grade of the commodity on which the contract is held IV. The market price at expiration V. The settlement price

You sold one oil future contract at $70 per barrel.What would be your profit (loss) at maturity if the oil spot price at that time is $73.12 per barrel Assume the contract size is 1,000 barrels and there are no transactions costs.

Which one of the following statements is true

If you determine that the DAX-30 Index futures is underpriced relative to the spot DAX-30 Index you could make an arbitrage profit by

Which of the following is true about profits from futures contracts

You purchased the following futures contract today at the settlement price listed in the Wall Street Journal.Answer the questions below regarding the contract.

You sold one wheat future contract at $3.04 per bushel.What would be your profit (loss) at maturity if the wheat spot price at that time were $2.98 per bushel Assume the contract size is 5,000 ounces and there are no transactions costs.

Foreign currency futures contracts are actively traded on the

The buyer of a futures contract is said to have a __________ position, and the seller of a futures contract is said to have a __________ position in futures.

Financial futures contracts are actively traded on the following indices except

A trader who has a __________ position in oil futures believes the price of oil will __________ in the future.

To exploit an expected increase in interest rates, an investor would most likely

Agricultural futures contracts are actively traded on

The Investment Environment

Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

A decrease in the basis will a long hedger and a short hedger.

A trader who has a position in wheat futures believes the price of wheat will in the future.

The buyer of a futures contract is said to have a position, and the seller of a futures contract is said to have a position in futures.

A trader who has a position in oil futures believes the price of oil will in the future.