Question 1

Financial futures contracts are actively traded on which of the following indices?

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 options are correct. 
A) The All ordinary index 
B) The DAX 30 Index 
C) The CAC 40 Index 
D) The Toronto 35 Index 
E) All of the options are correct.

Question 2

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

Accepted Answer

A) buy one May corn futures contract. 
B) buy two April corn futures contract. 
C) sell one April corn futures contract. 
D) sell one May corn futures contract. 
A) buy one May corn futures contract. 
B) buy two April corn futures contract. 
C) sell one April corn futures contract. 
D) sell one May corn futures contract.

Question 3

Agricultural futures contracts are actively traded on

Accepted Answer

A) milk. 
B) orange juice. 
C) lumber. 
D) milk and orange juice. 
E) All of the options are correct. 
A) milk. 
B) orange juice. 
C) lumber. 
D) milk and orange juice. 
E) All of the options are correct.

Question 4

Which of the following statements regarding delivery is false? I) Most futures contracts result in actual delivery.
II) Only 1% to 3% of futures contracts result in actual delivery.
III) Only 15% of futures contracts result in actual delivery.

Accepted Answer

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

Question 5

Taxation of futures trading gains and losses

Accepted Answer

A) is based on cumulative year-end profits or losses. 
B) occurs based on the date contracts are sold or closed. 
C) can be timed to offset stock-portfolio gains and losses. 
D) is based on the contract holding period. 
A) is based on cumulative year-end profits or losses. 
B) occurs based on the date contracts are sold or closed. 
C) can be timed to offset stock-portfolio gains and losses. 
D) is based on the contract holding period.

Question 6

Metals and energy currency futures contracts are actively traded on

Accepted Answer

A) gold. 
B) silver. 
C) propane. 
D) gold and silver. 
E) All of the options are correct. 
A) gold. 
B) silver. 
C) propane. 
D) gold and silver. 
E) All of the options are correct.

Question 7

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. 
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.

Question 8

If you took a long position in a pork bellies futures contract and then forgot about it, what would happen at the expiration of the contract?

Accepted Answer

A) Nothing-the seller understands that these things happen. 
B) You would wake up to find the pork bellies on your front lawn. 
C) Your broker would send you a nasty letter. 
D) You would be notified that you owe the holder of the short position a certain amount of cash. 
A) Nothing-the seller understands that these things happen. 
B) You would wake up to find the pork bellies on your front lawn. 
C) Your broker would send you a nasty letter. 
D) You would be notified that you owe the holder of the short position a certain amount of cash.

Question 9

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 bushels and there are no transactions costs.

Accepted Answer

A) $65 profit 
B) $650 profit 
C) $650 loss 
D) $65 loss 
A) $65 profit 
B) $650 profit 
C) $650 loss 
D) $65 loss

Question 10

To exploit an expected increase in interest rates, an investor would most likely

Accepted Answer

A) sell Treasury bond futures. 
B) take a long position in wheat futures. 
C) buy S&P 500 Index futures. 
D) take a long position in Treasury bond futures. 
A) sell Treasury bond futures. 
B) take a long position in wheat futures. 
C) buy S&P 500 Index futures. 
D) take a long position in Treasury bond futures.

Question 11

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

Accepted Answer

A) interest rates decline. 
B) interest rates increase. 
C) the prices of Treasury notes increase. 
D) the price of the long bond increases. 
A) interest rates decline. 
B) interest rates increase. 
C) the prices of Treasury notes increase. 
D) the price of the long bond increases.

Question 12

If you determine that the DAX-30 Index futures is overpriced relative to the spot DAX-30 Index, you could make an arbitrage profit by

Accepted Answer

A) buying all the stocks in the DAX-30 and selling put options on the DAX-30 Index. 
B) selling short all the stocks in the DAX-30 and buying DAX-30 futures. 
C) selling all the stocks in the DAX-30 and buying call options on the DAX-30 Index. 
D) selling DAX-30 Index futures and buying all the stocks in the DAX-30. 
A) buying all the stocks in the DAX-30 and selling put options on the DAX-30 Index. 
B) selling short all the stocks in the DAX-30 and buying DAX-30 futures. 
C) selling all the stocks in the DAX-30 and buying call options on the DAX-30 Index. 
D) selling DAX-30 Index futures and buying all the stocks in the DAX-30.

Question 13

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 contracts. 
C) sell one April oil futures contract. 
D) sell one May oil futures contract. 
A) buy one May oil futures contract. 
B) buy two April oil futures contracts. 
C) sell one April oil futures contract. 
D) sell one May oil futures contract.

Question 14

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 bushels and there are no transactions costs.

Accepted Answer

A) $950 profit 
B) $95 profit 
C) $950 loss 
D) $95 loss 
A) $950 profit 
B) $95 profit 
C) $950 loss 
D) $95 loss

Question 15

Futures contracts are regulated by

Accepted Answer

A) the Commodities Futures Trading Corporation. 
B) the Chicago Board of Trade. 
C) the Chicago Mercantile Exchange. 
D) the Federal Reserve. 
A) the Commodities Futures Trading Corporation. 
B) the Chicago Board of Trade. 
C) the Chicago Mercantile Exchange. 
D) the Federal Reserve.

Question 16

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 sometime in the future. 
D) is a contract to be signed in the future by the buyer and the seller of the commodity. 
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 sometime in the future. 
D) is a contract to be signed in the future by the buyer and the seller of the commodity.

Question 17

Metals and energy currency futures contracts are actively traded on

Accepted Answer

A) copper. 
B) platinum. 
C) weather. 
D) copper and platinum. 
E) All of the options are correct. 
A) copper. 
B) platinum. 
C) weather. 
D) copper and platinum. 
E) All of the options are correct.

Question 18

A decrease 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 19

Given a stock index with a value of $1,500, an anticipated dividend of $62 and a risk-free rate of 5.75%, what should be the value of one futures contract on the index?

Accepted Answer

A) $1,343.40 
B) $62.00 
C) $1,418.44 
D) $1,524.25 
A) $1,343.40 
B) $62.00 
C) $1,418.44 
D) $1,524.25

Question 20

Financial futures contracts are actively traded on which of the following indices?

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 of the options are correct. 
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 of the options are correct.

Exam 22: Futures Markets

Financial futures contracts are actively traded on which of the following indices?

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

Agricultural futures contracts are actively traded on

Which of the following statements regarding delivery is false? I) Most futures contracts result in actual delivery. II) Only 1% to 3% of futures contracts result in actual delivery. III) Only 15% of futures contracts result in actual delivery.

Taxation of futures trading gains and losses

Metals and energy currency futures contracts are actively traded on

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

If you took a long position in a pork bellies futures contract and then forgot about it, what would happen at the expiration of the contract?

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 bushels and there are no transactions costs.

To exploit an expected increase in interest rates, an investor would most likely

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

If you determine that the DAX-30 Index futures is overpriced relative to the spot DAX-30 Index, you could make an arbitrage profit by

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

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 bushels and there are no transactions costs.

Futures contracts are regulated by

A futures contract

Metals and energy currency futures contracts are actively traded on

A decrease in the basis will __________ a long hedger and __________ a short hedger.

Given a stock index with a value of $1,500, an anticipated dividend of $62 and a risk-free rate of 5.75%, what should be the value of one futures contract on the index?

Financial futures contracts are actively traded on which of the following indices?

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

A decrease in the basis will a long hedger and a short hedger.