Question 1

Futures contracts __________ traded on an organized exchange,and forward contracts __________ traded on an organized exchange.

Accepted Answer

A) are not; are 
B) are; are 
C) are not; are not 
D) are; are not 
E) are; may or may not be 
A) are not; are 
B) are; are 
C) are not; are not 
D) are; are not 
E) are; may or may not be

Question 2

A trader who has a __________ position in gold futures wants the price of gold to __________ in the future.

Accepted Answer

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

Question 3

You sold one soybean future contract at $5.13 per bushel.What would be your profit (loss)at maturity if the wheat spot price at that time were $5.26 per bushel? Assume the contract size is 5,000 ounces and there are no transactions costs.

Accepted Answer

A) $65 profit 
B) $650 profit 
C) $650 loss 
D) $65 loss 
E) none of the above. 
A) $65 profit 
B) $650 profit 
C) $650 loss 
D) $65 loss 
E) none of the above.

Question 4

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 above indices have actively traded futures contracts. 
A) the All ordinary index. 
B) the DAX 30 index. 
C) the CAC 40 Index. 
D) the Toronto 35 Index. 
E) all of the above indices have actively traded futures contracts.

Question 5

A futures contract

Accepted Answer

A) is an agreement to buy or sell a specified amount of an asset at the spot price on the expiration date of the contract. 
B) is an agreement to buy or sell a specified amount of an asset at a predetermined price on the expiration date of the contract. 
C) gives the buyer the right, but not the obligation, to buy an asset some time in the future. 
D) is a contract to be signed in the future by the buyer and the seller of the commodity. 
E) none of the above. 
A) is an agreement to buy or sell a specified amount of an asset at the spot price on the expiration date of the contract. 
B) is an agreement to buy or sell a specified amount of an asset at a predetermined price on the expiration date of the contract. 
C) gives the buyer the right, but not the obligation, to buy an asset some time in the future. 
D) is a contract to be signed in the future by the buyer and the seller of the commodity. 
E) none of the above.

Question 6

Given a stock index with a value of $1,000,an anticipated dividend of $30 and a risk-free rate of 6%,what should be the value of one futures contract on the index?

Accepted Answer

A) $943.40 
B) $970.00 
C) $1030.00 
D) $915.09 
E) $1000.00 
A) $943.40 
B) $970.00 
C) $1030.00 
D) $915.09 
E) $1000.00

Question 7

Agricultural futures contracts are actively traded on

Accepted Answer

A) rice. 
B) sugar. 
C) canola. 
D) A and B. 
E) all of the above. 
A) rice. 
B) sugar. 
C) canola. 
D) A and B. 
E) all of the above.

Question 8

Given a stock index with a value of $1,200,an anticipated dividend of $45 and a risk-free rate of 6%,what should be the value of one futures contract on the index?

Accepted Answer

A) $1227.00 
B) $1070.00 
C) $993.40 
D) $995.09 
E) $1000.00 
A) $1227.00 
B) $1070.00 
C) $993.40 
D) $995.09 
E) $1000.00

Question 9

Which of the following is false 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) A,B,and C 
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) A,B,and C

Question 10

Agricultural futures contracts are actively traded on

Accepted Answer

A) corn. 
B) oats. 
C) pork bellies. 
D) A and B. 
E) all of the above. 
A) corn. 
B) oats. 
C) pork bellies. 
D) A and B. 
E) all of the above.

Question 11

On January 1,you sold one April S&P 500 index futures contract at a futures price of 420.If on February 1 the April futures price were 430,what would be your profit (loss)if you closed your position (without considering transactions costs)?

Accepted Answer

A) $2,500 loss 
B) $10 loss 
C) $2,500 profit 
D) $10 profit 
E) none of the above 
A) $2,500 loss 
B) $10 loss 
C) $2,500 profit 
D) $10 profit 
E) none of the above

Question 12

You purchased 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 13

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 above are true. 
E) both A and B are true. 
A) posts gains or losses to each account daily. 
B) may result in margin calls. 
C) impacts only long positions. 
D) all of the above are true. 
E) both A and B are true.

Question 14

You hold one long oil futures contract that expires in April.To close your position in oil futures before the delivery date you must

Accepted Answer

A) buy one May oil futures contract. 
B) buy two April oil futures contract. 
C) sell one April oil futures contract. 
D) sell one May oil futures contract. 
E) none of the above. 
A) buy one May oil futures contract. 
B) buy two April oil futures contract. 
C) sell one April oil futures contract. 
D) sell one May oil futures contract. 
E) none of the above.

Question 15

Agricultural futures contracts are actively traded on

Accepted Answer

A) soybeans. 
B) oats. 
C) wheat. 
D) A and B. 
E) all of the above. 
A) soybeans. 
B) oats. 
C) wheat. 
D) A and B. 
E) all of the above.

Question 16

Distinguish between the short and long positions in futures transactions.

Accepted Answer

The trader taking the long position comm

Question 17

Metals and energy currency futures contracts are actively traded on

Accepted Answer

A) copper. 
B) platinum. 
C) weather. 
D) A and B. 
E) all of the above. 
A) copper. 
B) platinum. 
C) weather. 
D) A and B. 
E) all of the above.

Question 18

Which one of the following statements regarding "basis" is not 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) None of the above. 
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) None of the above.

Question 19

An investor with a short position in Treasury notes futures will profit if

Accepted Answer

A) interest rates decline. 
B) interest rate increase. 
C) the prices of Treasury notes increase. 
D) the price of the long bond increases. 
E) none of the above. 
A) interest rates decline. 
B) interest rate increase. 
C) the prices of Treasury notes increase. 
D) the price of the long bond increases. 
E) none of the above.

Question 20

If a trader holding a long position in corn futures fails to meet the obligations of a futures contract,the party that is hurt by the failure is

Accepted Answer

A) the offsetting short trader. 
B) the corn farmer. 
C) the clearinghouse. 
D) the broker. 
E) the commodities dealer. 
A) the offsetting short trader. 
B) the corn farmer. 
C) the clearinghouse. 
D) the broker. 
E) the commodities dealer.

Exam 22: Equity Valuation Models

Futures contracts __________ traded on an organized exchange,and forward contracts __________ traded on an organized exchange.

A trader who has a __________ position in gold futures wants the price of gold to __________ in the future.

You sold one soybean future contract at $5.13 per bushel.What would be your profit (loss)at maturity if the wheat spot price at that time were $5.26 per bushel? Assume the contract size is 5,000 ounces and there are no transactions costs.

Financial futures contracts are actively traded on the following indices except

A futures contract

Given a stock index with a value of $1,000,an anticipated dividend of $30 and a risk-free rate of 6%,what should be the value of one futures contract on the index?

Agricultural futures contracts are actively traded on

Given a stock index with a value of $1,200,an anticipated dividend of $45 and a risk-free rate of 6%,what should be the value of one futures contract on the index?

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

Agricultural futures contracts are actively traded on

On January 1,you sold one April S&P 500 index futures contract at a futures price of 420.If on February 1 the April futures price were 430,what would be your profit (loss)if you closed your position (without considering transactions costs)?

You purchased 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.

The process of marking-to-market

You hold one long oil futures contract that expires in April.To close your position in oil futures before the delivery date you must

Agricultural futures contracts are actively traded on

Distinguish between the short and long positions in futures transactions.

Metals and energy currency futures contracts are actively traded on

Which one of the following statements regarding "basis" is not true?

An investor with a short position in Treasury notes futures will profit if

If a trader holding a long position in corn futures fails to meet the obligations of a futures contract,the party that is hurt by the failure is

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

Futures contracts traded on an organized exchange,and forward contracts traded on an organized exchange.

A trader who has a position in gold futures wants the price of gold to in the future.