Question 1

Which of the following best represents the phenomenon of normal backwardation?

Accepted Answer

A)  the futures price is greater than the spot price 
B)  the futures price is less than the spot price 
C)  the futures price is greater than the expected spot price 
D)  the futures price is less than the expected spot price 
A)  the futures price is greater than the spot price 
B)  the futures price is less than the spot price 
C)  the futures price is greater than the expected spot price 
D)  the futures price is less than the expected spot price D

Question 2

The first financial futures contract traded on the SFE was the:

Accepted Answer

A)  90-day bank-accepted bill 
B)  three-year Commonwealth bond 
C)  10-year Commonwealth bond 
D)  Share Price Index 
A)  90-day bank-accepted bill 
B)  three-year Commonwealth bond 
C)  10-year Commonwealth bond 
D)  Share Price Index A

Question 3

The basis converges to zero over the life of the futures contract because:

Accepted Answer

A)  futures contracts are more actively traded towards the end of their life 
B)  futures contracts are less actively traded towards the end of their life 
C)  the spot and futures prices converge at expiry 
D)  none of these choices 
A)  futures contracts are more actively traded towards the end of their life 
B)  futures contracts are less actively traded towards the end of their life 
C)  the spot and futures prices converge at expiry 
D)  none of these choices B

Question 4

The buyer of a forward contract assumes a short position.

Accepted Answer

A) True 
 B)False

Question 5

Interest rate swaps involve the exchange of ________________.

Accepted Answer

A) actual fixed-rate bonds for actual floating-rate bonds 
B) actual floating-rate bonds for actual fixed-rate bonds 
C) net interest payments and an actual principal swap 
D) net interest payments based on notional principal,but no exchange of principal 
A) actual fixed-rate bonds for actual floating-rate bonds 
B) actual floating-rate bonds for actual fixed-rate bonds 
C) net interest payments and an actual principal swap 
D) net interest payments based on notional principal,but no exchange of principal

Question 6

What is the price of a bill with 45 days to maturity,a face value of $1 000 000 and a yield of 6.75% p.a.?

Accepted Answer

A)  $ \$ 979174.76 $ 
B)  $ \$ 983032.59 $ 
C)  $ \$ 991746.76 $ 
D)  $ \$ 994382.15 $ 
A)  $ \$ 979174.76 $ 
B)  $ \$ 983032.59 $ 
C)  $ \$ 991746.76 $ 
D)  $ \$ 994382.15 $

Question 7

The SPI futures contract was first traded on the SFE in 1979.

Accepted Answer

A) True 
 B)False

Question 8

The S&P/ASX200 spot contract is at 4055 and has a dividend yield of 8% p.a.The risk-free rate is 7% and the SPI futures price is currently trading at 4080.Which of the following statements is part of an arbitrage strategy to profit from this information?

Accepted Answer

A)  Buy the spot and buy the futures contract 
B)  Borrow the spot and borrow at the risk-free rate 
C)  Borrow the spot and sell the future contract 
D)  Repay the dividends and invest at the risk-free rate 
A)  Buy the spot and buy the futures contract 
B)  Borrow the spot and borrow at the risk-free rate 
C)  Borrow the spot and sell the future contract 
D)  Repay the dividends and invest at the risk-free rate

Question 9

Which of the following have been suggested as reasons for the existence of beneficial swaps to firms?

Accepted Answer

A)  tax 
B)  regulatory change 
C)  lowest cost of borrowing 
D)  all of the aboye 
A)  tax 
B)  regulatory change 
C)  lowest cost of borrowing 
D)  all of the aboye

Question 10

The reason(s)for the basis is/are:

Accepted Answer

A)  in the spot market, the buyer pays immediately, whereas in the futures market, this payment occurs at the expiry of the contract 
B)  in the spot market, the ownership of the asset is transferred immediately to the purchaser, which is not the case with the purchase of futures contracts 
C)  the buyer of an underlying asset faces carrying costs immediately, as opposed to the holder of a futures contract of such an asset 
D)  all of these choices 
A)  in the spot market, the buyer pays immediately, whereas in the futures market, this payment occurs at the expiry of the contract 
B)  in the spot market, the ownership of the asset is transferred immediately to the purchaser, which is not the case with the purchase of futures contracts 
C)  the buyer of an underlying asset faces carrying costs immediately, as opposed to the holder of a futures contract of such an asset 
D)  all of these choices

Question 11

In a study by Heaney in 1995,the decrease in futures mispricing has been attributed to:

Accepted Answer

A)  reduced maturity and increased transactions costs 
B)  increased transactions costs only 
C)  increased maturity and volume of trades 
D)  increased maturity and increased arbitrage traders 
A)  reduced maturity and increased transactions costs 
B)  increased transactions costs only 
C)  increased maturity and volume of trades 
D)  increased maturity and increased arbitrage traders

Question 12

In an inefficient market,the basis risk at the expiry of a future contract will be zero.

Accepted Answer

A) True 
 B)False

Question 13

The S&P/ASX200 spot contract is at 4055,and has a dividend yield of 8% p.a.The risk-free rate is 7% and the SPI futures price is currently trading at 4058.Given this information,calculate the amount by which the futures contract is mispriced according to the cost-of-carry model.

Accepted Answer

A)  $ -7.01$ 
B)  $ - 3.0$ 
C)  $ 3.00 $ 
D)  $ 7.01$ 
A)  $ -7.01$ 
B)  $ - 3.0$ 
C)  $ 3.00 $ 
D)  $ 7.01$

Question 14

Situations where the current futures price lies below the expected futures price are called:

Accepted Answer

A)  contango 
B)  normal contango 
C)  backwardation 
D)  normal backwardation 
A)  contango 
B)  normal contango 
C)  backwardation 
D)  normal backwardation

Question 15

To be able to undertake futures transactions,an investor must establish an account.To establish that account and to trade certain obligations are needed first,they are:

Accepted Answer

A)  establish an account, undergo an interview, maintain a margin facility 
B)  form a relationship with an exchange broker 
C)  be fully aware of the unique characteristics of futures markets 
D)  all of the above 
A)  establish an account, undergo an interview, maintain a margin facility 
B)  form a relationship with an exchange broker 
C)  be fully aware of the unique characteristics of futures markets 
D)  all of the above

Question 16

In converting a forward point quotation to a forward rate,if the forward points fall,such that the second number is smaller than the first,the forward points are subtracted from the spot rate.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is a feature of a swap?

Accepted Answer

A)  traded on organised exchange 
B)  involves a swapping of payments 
C)  one party gains while the other is made worse off 
D)  all of the above 
A)  traded on organised exchange 
B)  involves a swapping of payments 
C)  one party gains while the other is made worse off 
D)  all of the above

Question 18

There is a general consensus that futures trading results in an increase in market volatility.

Accepted Answer

A) True 
 B)False

Question 19

Swaps,like futures contracts,are generally written with zero value.

Accepted Answer

A) True 
 B)False

Question 20

Forward contracts _________ traded on an organised exchange,and futures contracts __________ traded on an organised exchange.

Accepted Answer

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

Which of the following best represents the phenomenon of normal backwardation?

The first financial futures contract traded on the SFE was the:

The basis converges to zero over the life of the futures contract because:

The buyer of a forward contract assumes a short position.

Interest rate swaps involve the exchange of ________________.

What is the price of a bill with 45 days to maturity,a face value of $1 000 000 and a yield of 6.75% p.a.?

The SPI futures contract was first traded on the SFE in 1979.

The S&P/ASX200 spot contract is at 4055 and has a dividend yield of 8% p.a.The risk-free rate is 7% and the SPI futures price is currently trading at 4080.Which of the following statements is part of an arbitrage strategy to profit from this information?

Which of the following have been suggested as reasons for the existence of beneficial swaps to firms?

The reason(s)for the basis is/are:

In a study by Heaney in 1995,the decrease in futures mispricing has been attributed to:

In an inefficient market,the basis risk at the expiry of a future contract will be zero.

The S&P/ASX200 spot contract is at 4055,and has a dividend yield of 8% p.a.The risk-free rate is 7% and the SPI futures price is currently trading at 4058.Given this information,calculate the amount by which the futures contract is mispriced according to the cost-of-carry model.

Situations where the current futures price lies below the expected futures price are called:

To be able to undertake futures transactions,an investor must establish an account.To establish that account and to trade certain obligations are needed first,they are:

In converting a forward point quotation to a forward rate,if the forward points fall,such that the second number is smaller than the first,the forward points are subtracted from the spot rate.

Which of the following is a feature of a swap?

There is a general consensus that futures trading results in an increase in market volatility.

Swaps,like futures contracts,are generally written with zero value.

Forward contracts _ traded on an organised exchange,and futures contracts __ traded on an organised exchange.

The Investment Decision

Australian Financial Markets

The International Investment Environment

Financial Management: Derivative Instruments and Information Sources

Money Market Securities

Bonds

Investor Preferences and Portfolio Concepts

Risky Asset Pricing Models and the Capm

Alternative Risky Asset Pricing Models

Concepts and Applications of Market Efficiency

Equity Valuation Models

Macro- and Industry Analysis of Share Markets

Qualitative Stock Selection

Quantitative Company Analysis

Option Contracts

Advanced Issues in Options

Alternative Investments

Portfolio Management

Performance Evaluation of Managed Funds

Filters

Exam 15: Futures and Forward Contracts

Which of the following best represents the phenomenon of normal backwardation?

The first financial futures contract traded on the SFE was the:

The basis converges to zero over the life of the futures contract because:

The buyer of a forward contract assumes a short position.

Interest rate swaps involve the exchange of ________________.

What is the price of a bill with 45 days to maturity,a face value of $1 000 000 and a yield of 6.75% p.a.?

The SPI futures contract was first traded on the SFE in 1979.

The S&P/ASX200 spot contract is at 4055 and has a dividend yield of 8% p.a.The risk-free rate is 7% and the SPI futures price is currently trading at 4080.Which of the following statements is part of an arbitrage strategy to profit from this information?

Which of the following have been suggested as reasons for the existence of beneficial swaps to firms?

The reason(s)for the basis is/are:

In a study by Heaney in 1995,the decrease in futures mispricing has been attributed to:

In an inefficient market,the basis risk at the expiry of a future contract will be zero.

The S&P/ASX200 spot contract is at 4055,and has a dividend yield of 8% p.a.The risk-free rate is 7% and the SPI futures price is currently trading at 4058.Given this information,calculate the amount by which the futures contract is mispriced according to the cost-of-carry model.

Situations where the current futures price lies below the expected futures price are called:

To be able to undertake futures transactions,an investor must establish an account.To establish that account and to trade certain obligations are needed first,they are:

In converting a forward point quotation to a forward rate,if the forward points fall,such that the second number is smaller than the first,the forward points are subtracted from the spot rate.

Which of the following is a feature of a swap?

There is a general consensus that futures trading results in an increase in market volatility.

Swaps,like futures contracts,are generally written with zero value.

Forward contracts _________ traded on an organised exchange,and futures contracts __________ traded on an organised exchange.

The Investment Decision

Australian Financial Markets

The International Investment Environment

Financial Management: Derivative Instruments and Information Sources

Money Market Securities

Bonds

Investor Preferences and Portfolio Concepts

Risky Asset Pricing Models and the Capm

Alternative Risky Asset Pricing Models

Concepts and Applications of Market Efficiency

Equity Valuation Models

Macro- and Industry Analysis of Share Markets

Qualitative Stock Selection

Quantitative Company Analysis

Option Contracts

Advanced Issues in Options

Alternative Investments

Portfolio Management

Performance Evaluation of Managed Funds

Filters

Forward contracts _ traded on an organised exchange,and futures contracts __ traded on an organised exchange.