Question 1

In the futures markets,the seller of a futures contract:

Accepted Answer

A)  takes the long position. 
B)  has the obligation to deliver the underlying financial asset at the specified future date. 
C)  has the obligation to receive the underlying financial asset at the specified future date. 
D)  may, at their choosing, deliver or receive the underlying financial assets at the specified future date. 
A)  takes the long position. 
B)  has the obligation to deliver the underlying financial asset at the specified future date. 
C)  has the obligation to receive the underlying financial asset at the specified future date. 
D)  may, at their choosing, deliver or receive the underlying financial assets at the specified future date.

Question 2

In the futures market,an instruction to a futures broker to buy or sell up to a specified price and within a specified time is a:

Accepted Answer

A)  market order. 
B)  margin order. 
C)  limit order. 
D)  liquid order. 
A)  market order. 
B)  margin order. 
C)  limit order. 
D)  liquid order.

Question 3

One of the problems of hedging with a futures contract compared with a forward contract is:

Accepted Answer

A)  basis risk. 
B)  default risk. 
C)  settlement risk. 
D)  interest rate risk. 
A)  basis risk. 
B)  default risk. 
C)  settlement risk. 
D)  interest rate risk.

Question 4

In the futures markets,profits from speculation primarily arise because of the:

Accepted Answer

A)  spread between the bid and ask prices on bonds. 
B)  illiquidity of markets for derivative securities. 
C)  high information costs in markets for derivative instruments. 
D)  difference in expectations among market participants about future prices of a commodity or financial asset. 
A)  spread between the bid and ask prices on bonds. 
B)  illiquidity of markets for derivative securities. 
C)  high information costs in markets for derivative instruments. 
D)  difference in expectations among market participants about future prices of a commodity or financial asset.

Question 5

In the futures markets,the price of a futures contract is:

Accepted Answer

A)  determined by market expectations of the spot price on the day of delivery. 
B)  determined each day by the futures exchange. 
C)  specified in each futures contract. 
D)  determined by demand and supply between market participants in the futures market. 
A)  determined by market expectations of the spot price on the day of delivery. 
B)  determined each day by the futures exchange. 
C)  specified in each futures contract. 
D)  determined by demand and supply between market participants in the futures market.

Question 6

Which of the following relating to Commonwealth Treasury bond futures is incorrect?

Accepted Answer

A)  The three-year and 10-year Treasury bonds must be settled in cash 
B)  They are quoted on the basis of their clean price 
C)  A 10-year Treasury bond futures contract's yield is quoted to three decimal places 
D)  Currently the three- and 10-year bond futures are traded on the SFE 
A)  The three-year and 10-year Treasury bonds must be settled in cash 
B)  They are quoted on the basis of their clean price 
C)  A 10-year Treasury bond futures contract's yield is quoted to three decimal places 
D)  Currently the three- and 10-year bond futures are traded on the SFE

Question 7

Which one of the following statements about speculators in futures markets is correct?

Accepted Answer

A)  Their main aim is to reduce their exposure to risk. 
B)  They make it difficult for hedgers to find someone to take the opposite position. 
C)  They aid hedgers by adding to the liquidity in the markets. 
D)  Once a trader is known as a speculator they are no longer allowed to participate in the markets. 
A)  Their main aim is to reduce their exposure to risk. 
B)  They make it difficult for hedgers to find someone to take the opposite position. 
C)  They aid hedgers by adding to the liquidity in the markets. 
D)  Once a trader is known as a speculator they are no longer allowed to participate in the markets.

Question 8

If an investor buys a three-year Commonwealth Treasury bond futures contract at 6 per cent and on the delivery date the interest rate of Treasury bonds is lower than they expected at 7 per cent,they will have:

Accepted Answer

A)  gained money on their long position. 
B)  lost money on their long position. 
C)  lost money on their short position. 
D)  gained money on their short position. 
A)  gained money on their long position. 
B)  lost money on their long position. 
C)  lost money on their short position. 
D)  gained money on their short position.

Question 9

Initial margin and marking to market are important risk procedures in futures markets.Discuss their role.

Accepted Answer

Given price in futures contracts over th

Question 10

A company who intends to borrow in 3 months can hedge and lock in the cost of borrowing by:

Accepted Answer

A)  buying an interest rate futures contract. 
B)  selling an interest rate futures contract. 
C)  selling a FRA. 
D)  buying an interest rate swap. 
A)  buying an interest rate futures contract. 
B)  selling an interest rate futures contract. 
C)  selling a FRA. 
D)  buying an interest rate swap.

Question 11

A company is considering using futures contracts to hedge an identified interest rate exposure on its debt facilities.However,it is concerned about the impact of basis risk.Which of the following statements regarding basis risk is incorrect?

Accepted Answer

A)  Basis is the difference between price in the physical market and the price of the relevant futures market contract. 
B)  The existence of basis risk removes the opportunity for a perfect borrowing hedge. 
C)  Initial basis will be evident while the market is of the view that physical market prices will remain stable. 
D)  Final basis will exist where a futures contract is used to hedge a risk associated with a different physical market product. 
A)  Basis is the difference between price in the physical market and the price of the relevant futures market contract. 
B)  The existence of basis risk removes the opportunity for a perfect borrowing hedge. 
C)  Initial basis will be evident while the market is of the view that physical market prices will remain stable. 
D)  Final basis will exist where a futures contract is used to hedge a risk associated with a different physical market product.

Question 12

A company will need to 'roll over' its existing $500 000 funding arrangement in two months' time for a further 90 days.It is concerned that interest rates in the short-term debt market may rise in the mean time,and decides to manage the risk exposure by entering into a forward rate agreement with its bank.The bank quotes a price (2Mv5M)of 9.45 to 30.In two months' time the reference rate (BBSW)is 10.20% per annum.Calculate the settlement amount.

Accepted Answer

A)  $881.43 
B)  $1058.10 
C)  $1423.80 
D)  $3750.00 
A)  $881.43 
B)  $1058.10 
C)  $1423.80 
D)  $3750.00

Question 13

When a lender uses a 10-year Treasury bond futures contract to hedge an issue of an unsecured note,this type of hedging is called intersection-commodity hedging.

Accepted Answer

A) True 
 B)False

Question 14

In the futures markets a speculator who believes strongly that interest rates will fall in the near future would be likely to buy futures contracts on Treasury bonds.

Accepted Answer

A) True 
 B)False

Question 15

If someone enters into a futures contract with the intention of taking delivery of a commodity or financial instrument specified in the futures contract for a price that was determined before delivery,they are likely to be a hedger.

Accepted Answer

A) True 
 B)False

Question 16

In the futures markets,speculators take on extra risk in futures markets as a result of the actions of:

Accepted Answer

A)  day traders. 
B)  hedgers. 
C)  brokers. 
D)  traders. 
A)  day traders. 
B)  hedgers. 
C)  brokers. 
D)  traders.

Question 17

In the futures market,the instruction to a futures broker to buy or sell at the current market price is a:

Accepted Answer

A)  call order. 
B)  limit order. 
C)  market order. 
D)  phone order. 
A)  call order. 
B)  limit order. 
C)  market order. 
D)  phone order.

Question 18

In Australia the Sydney Futures Exchange (SFE)that is now merged with the ASX introduced the 90-day bank-accepted bills futures contract in:

Accepted Answer

A)  1959. 
B)  1969. 
C)  1979. 
D)  1989. 
A)  1959. 
B)  1969. 
C)  1979. 
D)  1989.

Question 19

In the futures markets,the seller of a futures contract:

Accepted Answer

A)  takes the long position. 
B)  takes the short position. 
C)  has the obligation to receive the underlying financial assets at the specified future date. 
D)  is expecting the price of the underlying asset to increase. 
A)  takes the long position. 
B)  takes the short position. 
C)  has the obligation to receive the underlying financial assets at the specified future date. 
D)  is expecting the price of the underlying asset to increase.

Question 20

A company has an existing $900 000 promissory note facility,which it will roll over in 90 days.It is concerned that interest rates will rise before the roll-over date and enters into a 90-day bank-accepted bill futures contract at 92.50.Three months later,the company closes out its futures position at 91.75.Using the following data,calculate the profit or loss position of the futures transactions.(Disregard margin calls and transaction costs.)

Accepted Answer

A)  $1 601.58 profit 
B)  $1 601.58 loss 
C)  $1 779.54 profit 
D)  $1 779.54 loss 
A)  $1 601.58 profit 
B)  $1 601.58 loss 
C)  $1 779.54 profit 
D)  $1 779.54 loss

In the futures markets,the seller of a futures contract:

In the futures market,an instruction to a futures broker to buy or sell up to a specified price and within a specified time is a:

One of the problems of hedging with a futures contract compared with a forward contract is:

In the futures markets,profits from speculation primarily arise because of the:

In the futures markets,the price of a futures contract is:

Which of the following relating to Commonwealth Treasury bond futures is incorrect?

Which one of the following statements about speculators in futures markets is correct?

If an investor buys a three-year Commonwealth Treasury bond futures contract at 6 per cent and on the delivery date the interest rate of Treasury bonds is lower than they expected at 7 per cent,they will have:

Initial margin and marking to market are important risk procedures in futures markets.Discuss their role.

A company who intends to borrow in 3 months can hedge and lock in the cost of borrowing by:

A company is considering using futures contracts to hedge an identified interest rate exposure on its debt facilities.However,it is concerned about the impact of basis risk.Which of the following statements regarding basis risk is incorrect?

When a lender uses a 10-year Treasury bond futures contract to hedge an issue of an unsecured note,this type of hedging is called intersection-commodity hedging.

In the futures markets a speculator who believes strongly that interest rates will fall in the near future would be likely to buy futures contracts on Treasury bonds.

If someone enters into a futures contract with the intention of taking delivery of a commodity or financial instrument specified in the futures contract for a price that was determined before delivery,they are likely to be a hedger.

In the futures markets,speculators take on extra risk in futures markets as a result of the actions of:

In the futures market,the instruction to a futures broker to buy or sell at the current market price is a:

In Australia the Sydney Futures Exchange (SFE)that is now merged with the ASX introduced the 90-day bank-accepted bills futures contract in:

In the futures markets,the seller of a futures contract:

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

The Share Market and the Corporation

Corporations Issuing Equity in the Share Market

Investors in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

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Exam 19: Future Contracts and Forward Rate Agreements

In the futures markets,the seller of a futures contract:

In the futures market,an instruction to a futures broker to buy or sell up to a specified price and within a specified time is a:

One of the problems of hedging with a futures contract compared with a forward contract is:

In the futures markets,profits from speculation primarily arise because of the:

In the futures markets,the price of a futures contract is:

Which of the following relating to Commonwealth Treasury bond futures is incorrect?

Which one of the following statements about speculators in futures markets is correct?

If an investor buys a three-year Commonwealth Treasury bond futures contract at 6 per cent and on the delivery date the interest rate of Treasury bonds is lower than they expected at 7 per cent,they will have:

Initial margin and marking to market are important risk procedures in futures markets.Discuss their role.

A company who intends to borrow in 3 months can hedge and lock in the cost of borrowing by:

A company is considering using futures contracts to hedge an identified interest rate exposure on its debt facilities.However,it is concerned about the impact of basis risk.Which of the following statements regarding basis risk is incorrect?

When a lender uses a 10-year Treasury bond futures contract to hedge an issue of an unsecured note,this type of hedging is called intersection-commodity hedging.

In the futures markets a speculator who believes strongly that interest rates will fall in the near future would be likely to buy futures contracts on Treasury bonds.

If someone enters into a futures contract with the intention of taking delivery of a commodity or financial instrument specified in the futures contract for a price that was determined before delivery,they are likely to be a hedger.

In the futures markets,speculators take on extra risk in futures markets as a result of the actions of:

In the futures market,the instruction to a futures broker to buy or sell at the current market price is a:

In Australia the Sydney Futures Exchange (SFE)that is now merged with the ASX introduced the 90-day bank-accepted bills futures contract in:

In the futures markets,the seller of a futures contract:

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

The Share Market and the Corporation

Corporations Issuing Equity in the Share Market

Investors in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

Filters