Exam 17: Futures Markets and Risk Management

The advantage that standardization of futures contracts brings is that ________ is improved because ________.

On Monday morning you sell one June T-bond futures contract at $97,843.75. The contract's face value is $100,000. The initial margin requirement is $2,700, and the maintenance margin requirement is $2,000 per contract. Use the following price data to answer the following questions. On which of the given days do you get a margin call?

A market timer now believes that the economy will soften over the rest of the year as the housing market slump continues, and she also believes that foreign investors will stop buying U.S. fixed-income securities in the large quantities that they have in the past. One way the timer could take advantage of this forecast is to ________.

An investor would want to ________ to exploit an expected fall in interest rates.

An investor establishes a long position in a futures contract now (time 0) and holds the position until maturity (time T). The sum of all daily settlements will be ________.

Futures contracts have many advantages over forward contracts except that ________.

If the S&P 500 Index futures contract is overpriced relative to the spot S&P 500 Index, you should ________.

At maturity of a futures contract, the spot price and futures price must be approximately the same because of ________.

Which one of the following refers to the daily settlement of obligations on future positions?

At year-end, taxes on a futures position ________.

Sahali Trading Company has issued $100 million worth of long-term bonds at a fixed rate of 9%. Sahali Trading Company then enters into an interest rate swap where it will pay LIBOR and receive a fixed 8% on a notional principal of $100 million. After all these transactions are considered, Sahali's cost of funds is ________.

Interest rate futures contracts exist for all of the following except ________.