Question 1

A futures price must be greater than or equal to the current spot price,plus the carrying cost.

Accepted Answer

A) True 
 B)False

Question 2

Assuming perfect convergence,a spot price will be:

Accepted Answer

A) greater than the futures price,which has a term to maturity of zero. 
B) less than the futures price,which has a term to maturity of zero. 
C) the cost of holding a commodity in a futures contract from one time period to another. 
D) the price of a commodity in a futures contract,which expires today. 
A) greater than the futures price,which has a term to maturity of zero. 
B) less than the futures price,which has a term to maturity of zero. 
C) the cost of holding a commodity in a futures contract from one time period to another. 
D) the price of a commodity in a futures contract,which expires today.

Question 3

Entering into a contract to sell and later entering into a contract to buy is called _____________.

Accepted Answer

The answer of Entering into a contract to sell and...

Question 4

If an individual who takes a position as a buyer in a futures contract wishes to realise a profit from their position,they should:

Accepted Answer

A) find a buyer and sell their position. 
B) offset their original contract by entering into another as a seller. 
C) offset their original contract by entering into another as a buyer. 
D) take delivery of the commodity. 
A) find a buyer and sell their position. 
B) offset their original contract by entering into another as a seller. 
C) offset their original contract by entering into another as a buyer. 
D) take delivery of the commodity.

Question 5

Runaway Bank Ltd is expecting a cash inflow of $500 000 in one month,which it intends to invest in 90-day bank bills.Management of the company has chosen to hedge against fluctuations in interest rates by hedging with a bank bill futures contract.When the company enters the hedged position,the yields are 10.4% p.a.(spot)and 10.6% p.a.(futures).When the hedge is reversed,the yields are 7.6% p.a.(spot)and 7.78% p.a.(futures).Including the gain from the futures,what will be the implied yield that Runaway Bank Ltd receives?

Accepted Answer

A) 8.63% 
B) 7.72% 
C) 10.42% 
D) 10.55% 
A) 8.63% 
B) 7.72% 
C) 10.42% 
D) 10.55%

Question 6

'Short selling' refers to:

Accepted Answer

A) selling a contract allowing the holder to sell the underlying asset back to the seller at maturity. 
B) a process that is used when stock prices are expected to gradually increase over time. 
C) selling an asset that does not belong to you,and buying it back at a later date. 
D) none of the given options. 
A) selling a contract allowing the holder to sell the underlying asset back to the seller at maturity. 
B) a process that is used when stock prices are expected to gradually increase over time. 
C) selling an asset that does not belong to you,and buying it back at a later date. 
D) none of the given options.

A futures price must be greater than or equal to the current spot price,plus the carrying cost.

Assuming perfect convergence,a spot price will be:

Entering into a contract to sell and later entering into a contract to buy is called _____________.

If an individual who takes a position as a buyer in a futures contract wishes to realise a profit from their position,they should:

'Short selling' refers to:

Introduction

Consumption, Investment and the Capital Market

The Time Value of Money: An Introduction to Financial Mathematics

Applying the Time Value of Money to Security Valuation

Project Evaluation: Principles and Methods

The Application of Project Evaluation Methods

Risk and Return

The Capital Market

Sources of Finance: Equity

Sources of Finance: Debt

Payout Policy

Principles of Capital Structure

Capital Structure Decisions

The Cost of Capital and Taxation Issues in Project Evaluation

Leasing and Other Equipment Finance

Capital Market Efficiency

Options and Contingent Claims

Analysis of Takeovers

International Financial Management

Management of Short-Term Assets: Inventory

Management of Short-Term Assets: Liquid Assets and Accounts Receivable

Filters

Exam 17: Futures Contracts

A futures price must be greater than or equal to the current spot price,plus the carrying cost.

Assuming perfect convergence,a spot price will be:

Entering into a contract to sell and later entering into a contract to buy is called _____________.

If an individual who takes a position as a buyer in a futures contract wishes to realise a profit from their position,they should:

'Short selling' refers to:

Introduction

Consumption, Investment and the Capital Market

The Time Value of Money: An Introduction to Financial Mathematics

Applying the Time Value of Money to Security Valuation

Project Evaluation: Principles and Methods

The Application of Project Evaluation Methods

Risk and Return

The Capital Market

Sources of Finance: Equity

Sources of Finance: Debt

Payout Policy

Principles of Capital Structure

Capital Structure Decisions

The Cost of Capital and Taxation Issues in Project Evaluation

Leasing and Other Equipment Finance

Capital Market Efficiency

Options and Contingent Claims

Analysis of Takeovers

International Financial Management

Management of Short-Term Assets: Inventory

Management of Short-Term Assets: Liquid Assets and Accounts Receivable

Filters