Question 1

Foreign currency futures contracts are actively traded on the

Accepted Answer

A) Japanese yen. 
B) Australian dollar. 
C) Brazilian real. 
D) Japanese yen and Australian dollar. 
E) All of the options are correct. 
A) Japanese yen. 
B) Australian dollar. 
C) Brazilian real. 
D) Japanese yen and Australian dollar. 
E) All of the options are correct.

Question 2

Which of the following statements is false? I) The maintenance-margin is the amount of money you post with your broker when you buy or sell a futures contract.
II) If the value of the margin account falls below the maintenance-margin requirement, the holder of the contract will receive a margin call.
III) A margin deposit can only be met with cash.
IV) All futures contracts require the same margin deposit.

Accepted Answer

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

Question 3

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) $1,030.00 
D) $915.09 
A) $943.40 
B) $970.00 
C) $1,030.00 
D) $915.09

Question 4

Financial futures contracts are actively traded on the following indices except

Accepted Answer

A) the S&P 500 Index. 
B) the New York Stock Exchange Index. 
C) the Nikkei Index. 
D) the Dow Jones Industrial Index. 
E) All are actively traded. 
A) the S&P 500 Index. 
B) the New York Stock Exchange Index. 
C) the Nikkei Index. 
D) the Dow Jones Industrial Index. 
E) All are actively traded.

Question 5

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

Question 6

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. 
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.

Question 7

On January 1, you bought one April S&P 500 index futures contract at a futures price of 1,420.If, on February 1, the April futures price was 1,430, 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 
A) $2,500 loss 
B) $10 loss 
C) $2,500 profit 
D) $10 profit

Question 8

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 
A) $5.50 profit 
B) $5,500 profit 
C) $5.50 loss 
D) $5,500 loss

Question 9

On April 1, you bought one S&P 500 Index futures contract at a futures price of 1,550.If, on June 15, the futures price was 1,612, 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 
A) $1,550 loss 
B) $15,550 loss 
C) $15,550 profit 
D) $1,550 profit

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. 
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.

Question 11

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 
A) hurt; benefit 
B) hurt; hurt 
C) benefit; hurt 
D) benefit; benefit

Question 12

The terms of futures contracts __________ standardized, and the terms of forward contracts __________ standardized.

Accepted Answer

A) are; are 
B) are not; are 
C) are; are not 
D) are not; are not 
A) are; are 
B) are not; are 
C) are; are not 
D) are not; are not

Question 13

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. 
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.

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 bushels 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

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 
A) make delivery; take delivery 
B) take delivery; make delivery 
C) take delivery; take delivery 
D) make delivery; make delivery

Question 16

If a trader holding a long position in oil 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 oil producer. 
C) the clearinghouse. 
D) the broker. 
A) the offsetting short trader. 
B) the oil producer. 
C) the clearinghouse. 
D) the broker.

Question 17

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 
A) are not; are 
B) are; are 
C) are not; are not 
D) are; are not

Question 18

You sold 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 
A) $5.50 profit 
B) $5,500 profit 
C) $5.50 loss 
D) $5,500 loss

Question 19

On January 1, you sold one April S&P 500 Index futures contract at a futures price of 1,420.If, on February 1, the April futures price was 1,430, 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 
A) $2,500 loss 
B) $10 loss 
C) $2,500 profit 
D) $10 profit

Question 20

The expectations hypothesis of futures pricing

Accepted Answer

A) is the simplest theory of futures pricing. 
B) states that the futures price equals the expected value of the future spot price of the asset. 
C) is not a zero-sum game. 
D) is the simplest theory of futures pricing and states that the futures price equals the expected value of the future spot price of the asset. 
A) is the simplest theory of futures pricing. 
B) states that the futures price equals the expected value of the future spot price of the asset. 
C) is not a zero-sum game. 
D) is the simplest theory of futures pricing and states that the futures price equals the expected value of the future spot price of the asset.

Exam 22: Futures Markets

Foreign currency futures contracts are actively traded on the

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?

Financial futures contracts are actively traded on the following indices except

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

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

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

On April 1, you bought one S&P 500 Index futures contract at a futures price of 1,550.If, on June 15, the futures price was 1,612, what would be your profit (loss) if you closed your position (without considering transactions costs)?

Which one of the following statements is true?

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

The terms of futures contracts __________ standardized, and the terms of forward contracts __________ standardized.

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

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 bushels and there are no transactions costs.

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.

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

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

You sold 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.

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

The expectations hypothesis of futures pricing

The Investment Environment

Financial Markets, 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

Behavioural 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

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

The terms of futures contracts standardized, and the terms of forward contracts standardized.

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.

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