Question 1

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

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. 
A) ignore interest rate futures. 
B) buy S&P futures. 
C) buy interest rate futures. 
D) sell Treasury bonds in the spot market.

Question 2

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

Question 3

Normal backwardation

Accepted Answer

A) maintains that, for most commodities, there are natural hedgers who desire to shed risk. 
B) maintains that speculators will enter the long side of the contract only if the futures price is below the expected spot price. 
C) assumes that risk premiums in the futures markets are based on systematic risk. 
D) maintains that, for most commodities, there are natural hedgers who desire to shed risk, and that speculators will enter the long side of the contract only if the futures price is below the expected spot price. 
A) maintains that, for most commodities, there are natural hedgers who desire to shed risk. 
B) maintains that speculators will enter the long side of the contract only if the futures price is below the expected spot price. 
C) assumes that risk premiums in the futures markets are based on systematic risk. 
D) maintains that, for most commodities, there are natural hedgers who desire to shed risk, and that speculators will enter the long side of the contract only if the futures price is below the expected spot price.

Question 4

Which one of the following statements regarding delivery is true?

Accepted Answer

A) Most futures contracts result in actual delivery. 
B) Only 1% to 3% of futures contracts result in actual delivery. 
C) Only 15% of futures contracts result in actual delivery. 
D) Approximately 50% of futures contracts result in actual delivery. 
A) Most futures contracts result in actual delivery. 
B) Only 1% to 3% of futures contracts result in actual delivery. 
C) Only 15% of futures contracts result in actual delivery. 
D) Approximately 50% of futures contracts result in actual delivery.

Question 5

Which of the following items is not 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) II and IV 
B) I, III, and V 
C) I and V 
D) I, IV, and V 
A) II and IV 
B) I, III, and V 
C) I and V 
D) I, IV, and V

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

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

Normal backwardation

Which one of the following statements regarding delivery is true?

Which of the following items is not 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

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

Exam 22: Futures Markets

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

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

Normal backwardation

Which one of the following statements regarding delivery is true?

Which of the following items is not 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

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