Question 1

If the firm must buy silver in the future and thus pay for the metal in the future, management may reduce the risk of loss from an increase in the price of silver by

Accepted Answer

A)  ​taking a long position and entering a contract to buy silver 
B)  ​taking a short position and entering a contract to deliver silver 
C)  ​accepting delivery early 
D)  ​refusing to accept delivery if the price rises 
A)  ​taking a long position and entering a contract to buy silver 
B)  ​taking a short position and entering a contract to deliver silver 
C)  ​accepting delivery early 
D)  ​refusing to accept delivery if the price rises A

Question 2

A futures contract to make delivery is a short position.​

Accepted Answer

A) True 
 B)False  True

Question 3

Swap agreements are one means to help manage risk. tures.​

Accepted Answer

A) True 
 B)False  True

Question 4

If the futures price falls,​
1) the short position sustains a profit
2) the short position sustains a loss
3) the long position sustains a loss
4) the long position sustains a profit

Accepted Answer

A) ​1 and 3 
B) ​1 and 4 
C) 2 and 3 
D) 2 and 4 
A) ​1 and 3 
B) ​1 and 4 
C) 2 and 3 
D) 2 and 4

Question 5

If interest rates increase, the short sellers of Treasury bond futures profit. accepting delivery.​

Accepted Answer

A) True 
 B)False

Question 6

If an individual has a contract to accept future delivery of Treasury bills, the individual cannot close the contract without accepting delivery.​

Accepted Answer

A) True 
 B)False

Question 7

Swap agreements​

Accepted Answer

A)  ​transfer ownership 
B)  ​transfer liabilities 
C)  ​transfer payments 
D)  ​transfer tax obligations 
A)  ​transfer ownership 
B)  ​transfer liabilities 
C)  ​transfer payments 
D)  ​transfer tax obligations

Question 8

When a stock index futures contract expires, the buyer takes delivery of the securities.​

Accepted Answer

A) True 
 B)False

Question 9

When speculators invest in commodity futures, they​

Accepted Answer

A)  ​enter contracts to make future delivery 
B)  ​enter contracts to accept future delivery 
C)  ​either enter contracts to make or accept future delivery 
D)  ​rarely experience losses 
A)  ​enter contracts to make future delivery 
B)  ​enter contracts to accept future delivery 
C)  ​either enter contracts to make or accept future delivery 
D)  ​rarely experience losses

Question 10

As a result of the small margin requirements, investing in futures contracts is considered risky.​

Accepted Answer

A) True 
 B)False

Question 11

The buyers (the longs) and not the sellers (the shorts) must make margin payments when speculating with futures contracts.​

Accepted Answer

A) True 
 B)False

Question 12

If an individual enters a contract to accept future delivery of Treasury bonds, that is a long position.​

Accepted Answer

A) True 
 B)False

Question 13

A grower of corn enters a contract to make future delivery of corn to reduce the risk of loss from price fluctuations.​

Accepted Answer

A) True 
 B)False

Question 14

The futures price and the spot price must be equal

Accepted Answer

A)  ​when the contract is sold 
B)  ​when the contract is bought 
C)  ​when the contract is canceled 
D)  ​when the contract expires 
A)  ​when the contract is sold 
B)  ​when the contract is bought 
C)  ​when the contract is canceled 
D)  ​when the contract expires

Question 15

If a financial manager must sell a product in the​ future that is currently being manufactured, that individual may reduce the risk of loss from a price decline by
1) entering a futures contract to sell the good
2) entering a futures contract to buy the good
3) establishing a short position
4) establishing a long position

Accepted Answer

A) ​1 and 3 
B) 1 and 4 
C) 2 and 3 
D) ​2 and 4 
A) ​1 and 3 
B) 1 and 4 
C) 2 and 3 
D) ​2 and 4

Question 16

Selling a commodity futures (entering a contract to make delivery) is a long position.​

Accepted Answer

A) True 
 B)False

Question 17

A user of corn enters a contract to make future delivery of corn to reduce the risk of loss from price fluctuations.​

Accepted Answer

A) True 
 B)False

Question 18

​If the futures price of a commodity rises,
1) the long position sustains a loss
2) the long position experiences a profit
3) the short position sustains a loss
4) the short position experiences a profit

Accepted Answer

A) 1 and 3 
B) ​1 and 4 
C) ​2 and 3 
D) ​2 and 4 
A) 1 and 3 
B) ​1 and 4 
C) ​2 and 3 
D) ​2 and 4

Question 19

Which of the following statements are true concerning stock index futures?
​1) Stock index futures may be used to hedge against stock prices rising.
2) Stock index futures require substantial margin and are a source of financial leverage.
3) Stock index futures are settled in cash and not in delivery.
4) Stock index futures are settle in specific securities.

Accepted Answer

A) ​1 and 3 
B) ​1 and 4 
C) ​2 and 3 
D) ​2 and 4 
A) ​1 and 3 
B) ​1 and 4 
C) ​2 and 3 
D) ​2 and 4

Question 20

The amount of margin required to buy a futures contract is equal to 50 percent of the value of the contract.​

Accepted Answer

A) True 
 B)False

Exam 29: Futures and Swaps

If the firm must buy silver in the future and thus pay for the metal in the future, management may reduce the risk of loss from an increase in the price of silver by

A futures contract to make delivery is a short position.​

Swap agreements are one means to help manage risk. tures.​

If the futures price falls,​ 1) the short position sustains a profit 2) the short position sustains a loss 3) the long position sustains a loss 4) the long position sustains a profit

If interest rates increase, the short sellers of Treasury bond futures profit. accepting delivery.​

If an individual has a contract to accept future delivery of Treasury bills, the individual cannot close the contract without accepting delivery.​

Swap agreements​

When a stock index futures contract expires, the buyer takes delivery of the securities.​

When speculators invest in commodity futures, they​

As a result of the small margin requirements, investing in futures contracts is considered risky.​

The buyers (the longs) and not the sellers (the shorts) must make margin payments when speculating with futures contracts.​

If an individual enters a contract to accept future delivery of Treasury bonds, that is a long position.​

A grower of corn enters a contract to make future delivery of corn to reduce the risk of loss from price fluctuations.​

The futures price and the spot price must be equal

Selling a commodity futures (entering a contract to make delivery) is a long position.​

A user of corn enters a contract to make future delivery of corn to reduce the risk of loss from price fluctuations.​

​If the futures price of a commodity rises, 1) the long position sustains a loss 2) the long position experiences a profit 3) the short position sustains a loss 4) the short position experiences a profit

The amount of margin required to buy a futures contract is equal to 50 percent of the value of the contract.​

The Role of Financial Markets and Financial Intermediaries

Investment Banking

Securities Markets

The Federal Reserve

International Currency Flows

The Time Value of Money

Risk and Its Measurement

Analysis of Financial Statements

The Features of Stock

Stock Valuation

The Features of Long-Term Debt - Bonds

Bond Pricing and Yields

Preferred Stock

Convertile Securities

Investment Returns

Investment Companies

Forms of Businss and Corporate Taxation

Break-Even Analysis and the Payback Period

Leverage

Cost of Capital

Capital Budgeting

Forecasting

Cash Budgeting

Management of Current Assets

Management of Short-Term Liabilities

Intermediate-Term Debt and Leasing

Options: Puts and Calls

Filters

A futures contract to make delivery is a short position.

Swap agreements are one means to help manage risk. tures.

If the futures price falls, 1) the short position sustains a profit 2) the short position sustains a loss 3) the long position sustains a loss 4) the long position sustains a profit

If interest rates increase, the short sellers of Treasury bond futures profit. accepting delivery.

If an individual has a contract to accept future delivery of Treasury bills, the individual cannot close the contract without accepting delivery.

Swap agreements

When a stock index futures contract expires, the buyer takes delivery of the securities.

When speculators invest in commodity futures, they

As a result of the small margin requirements, investing in futures contracts is considered risky.

The buyers (the longs) and not the sellers (the shorts) must make margin payments when speculating with futures contracts.

If an individual enters a contract to accept future delivery of Treasury bonds, that is a long position.

A grower of corn enters a contract to make future delivery of corn to reduce the risk of loss from price fluctuations.

Selling a commodity futures (entering a contract to make delivery) is a long position.

A user of corn enters a contract to make future delivery of corn to reduce the risk of loss from price fluctuations.

If the futures price of a commodity rises, 1) the long position sustains a loss 2) the long position experiences a profit 3) the short position sustains a loss 4) the short position experiences a profit

The amount of margin required to buy a futures contract is equal to 50 percent of the value of the contract.