Question 1

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

Question 2

To hedge a long position in Treasury bonds,an investor most likely would

Accepted Answer

A) buy interest rate futures. 
B) sell S&P futures. 
C) sell interest rate futures. 
D) buy Treasury bonds in the spot market. 
E) none of the above. 
A) buy interest rate futures. 
B) sell S&P futures. 
C) sell interest rate futures. 
D) buy Treasury bonds in the spot market. 
E) none of the above. C

Question 3

Given a stock index with a value of $1100,an anticipated dividend of $27 and a risk-free rate of 3%,that should be the value of one futures contract on the index?

Accepted Answer

A) $943.40 
B) $970.00 
C) $913.40 
D) $1106.00 
E) $1000.00 
A) $943.40 
B) $970.00 
C) $913.40 
D) $1106.00 
E) $1000.00 D

Question 4

An increase 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

Question 5

On January 1,the listed spot and futures prices of a Treasury bond were 93.8 and 93.13.You purchased $100,000 par value Treasury bonds and sold one Treasury bond futures contract.One month later,the listed spot price and futures prices were 94 and 94.09,respectively.If you were to liquidate your position,your profits would be

Accepted Answer

A) $125 loss. 
B) $125 profit. 
C) $12.50 loss. 
D) $1,250 loss. 
E) none of the above. 
A) $125 loss. 
B) $125 profit. 
C) $12.50 loss. 
D) $1,250 loss. 
E) none of the above.

Question 6

You sold one corn future contract at $2.29 per bushel.What would be your profit (loss)at maturity if the corn spot price at that time were $2.10 per bushel? Assume the contract size is 5,000 ounces and there are no transactions costs.

Accepted Answer

A) $950 profit 
B) $95 profit 
C) $950 loss 
D) $95 loss 
E) none of the above. 
A) $950 profit 
B) $95 profit 
C) $950 loss 
D) $95 loss 
E) none of the above.

Question 7

On April 1,you bought one S&P 500 index futures contract at a futures price of 950.If on June 15th the futures price were 1012,what would be your profit (loss)if you closed your position (without considering transactions costs)?

Accepted Answer

A) $1,550 loss 
B) $15,550 loss 
C) $15,550 profit 
D) $1,550 profit 
E) none of the above 
A) $1,550 loss 
B) $15,550 loss 
C) $15,550 profit 
D) $1,550 profit 
E) none of the above

Question 8

To hedge a short position in Treasury bonds,an investor most likely would

Accepted Answer

A) ignore interest rate futures. 
B) buy S&P futures. 
C) buy interest rate futures. 
D) sell Treasury bonds in the spot market. 
E) none of the above. 
A) ignore interest rate futures. 
B) buy S&P futures. 
C) buy interest rate futures. 
D) sell Treasury bonds in the spot market. 
E) none of the above.

Question 9

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 10

Given a stock index with a value of $1,125,an anticipated dividend of $33 and a risk-free rate of 4%,what should be the value of one futures contract on the index?

Accepted Answer

A) $1137.00 
B) $1070.00 
C) $993.40 
D) $995.09 
E) $1000.00 
A) $1137.00 
B) $1070.00 
C) $993.40 
D) $995.09 
E) $1000.00

Question 11

The open interest on silver futures at a particular time is the

Accepted Answer

A) number of silver futures contracts traded during the day. 
B) number of outstanding silver futures contracts for delivery within the next month. 
C) number of silver futures contracts traded the previous day. 
D) number of all long or short silver futures contracts outstanding. 
E) none of the above. 
A) number of silver futures contracts traded during the day. 
B) number of outstanding silver futures contracts for delivery within the next month. 
C) number of silver futures contracts traded the previous day. 
D) number of all long or short silver futures contracts outstanding. 
E) none of the above.

Question 12

You purchased 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 above. 
A) $3.12 profit 
B) $31.20 profit 
C) $3.12 loss 
D) $31.20 loss 
E) none of the above.

Question 13

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 14

The terms of futures contracts such as the quality and quantity of the commodity and the delivery date are

Accepted Answer

A) specified by the buyers and sellers. 
B) specified only by the buyers. 
C) specified by the futures exchanges. 
D) specified by brokers and dealers. 
E) none of the above. 
A) specified by the buyers and sellers. 
B) specified only by the buyers. 
C) specified by the futures exchanges. 
D) specified by brokers and dealers. 
E) none of the above.

Question 15

You purchased 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 
E) none of the above. 
A) $30 profit 
B) $300 profit 
C) $300 loss 
D) $30 loss 
E) none of the above.

Question 16

You purchased one silver future contract at $3 per ounce.What would be your profit (loss)at maturity if the silver spot price at that time is $4.10 per ounce? Assume the contract size is 5,000 ounces and there are no transactions costs.

Accepted Answer

A) $5.50 profit 
B) $5,500 profit 
C) $5.50 loss 
D) $5,500 loss 
E) none of the above. 
A) $5.50 profit 
B) $5,500 profit 
C) $5.50 loss 
D) $5,500 loss 
E) none of the above.

Question 17

Which one of the following statements regarding "basis" is true?

Accepted Answer

A) The basis is the difference between the futures price and the spot price. 
B) The basis risk is borne by the hedger. 
C) A short hedger suffers losses when the basis decreases. 
D) The basis increases when the futures price increases by more than the spot price. 
E) A,B,and D 
A) The basis is the difference between the futures price and the spot price. 
B) The basis risk is borne by the hedger. 
C) A short hedger suffers losses when the basis decreases. 
D) The basis increases when the futures price increases by more than the spot price. 
E) A,B,and D

Question 18

Investors who take long positions in futures agree to __________ of the commodity on the delivery date,and those who take the short positions agree to __________ of the commodity.

Accepted Answer

A) make delivery; take delivery 
B) take delivery; make delivery 
C) take delivery; take delivery 
D) make delivery; make delivery 
E) negotiate the price; pay the price 
A) make delivery; take delivery 
B) take delivery; make delivery 
C) take delivery; take delivery 
D) make delivery; make delivery 
E) negotiate the price; pay the price

Question 19

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 above. 
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 above.

Question 20

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.

Exam 22: Equity Valuation Models

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

To hedge a long position in Treasury bonds,an investor most likely would

Given a stock index with a value of $1100,an anticipated dividend of $27 and a risk-free rate of 3%,that should be the value of one futures contract on the index?

An increase in the basis will __________ a long hedger and __________ a short hedger.

You sold one corn future contract at $2.29 per bushel.What would be your profit (loss)at maturity if the corn spot price at that time were $2.10 per bushel? Assume the contract size is 5,000 ounces and there are no transactions costs.

On April 1,you bought one S&P 500 index futures contract at a futures price of 950.If on June 15th the futures price were 1012,what would be your profit (loss)if you closed your position (without considering transactions costs)?

To hedge a short position in Treasury bonds,an investor most likely would

Open interest includes

Given a stock index with a value of $1,125,an anticipated dividend of $33 and a risk-free rate of 4%,what should be the value of one futures contract on the index?

The open interest on silver futures at a particular time is the

You purchased 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.

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

The terms of futures contracts such as the quality and quantity of the commodity and the delivery date are

You purchased 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.

You purchased one silver future contract at $3 per ounce.What would be your profit (loss)at maturity if the silver spot price at that time is $4.10 per ounce? Assume the contract size is 5,000 ounces and there are no transactions costs.

Which one of the following statements regarding "basis" is true?

Investors who take long positions in futures agree to __________ of the commodity on the delivery date,and those who take the short positions agree to __________ of the commodity.

In a futures contract the futures price is

Which of the following is true about profits from futures contracts?

The Investment Environment

Asset Classes and Financial Instruments

How Securities are Traded

Mutual Funds and Other Investment Companies

Introduction to Risk,return,and the Historical Record

Risk Aversion and 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

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, swaps, and Risk Management

Macroeconomic and Industry Analysis

Financial Statement Analysis

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the CFA Institute Appendices

Filters

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

An increase in the basis will a long hedger and a short hedger.

On April 1,you bought one S&P 500 index futures contract at a futures price of 950.If on June 15^th the futures price were 1012,what would be your profit (loss)if you closed your position (without considering transactions costs)?

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

Investors who take long positions in futures agree to of the commodity on the delivery date,and those who take the short positions agree to of the commodity.