Question 1

Speculation is equivalent to gambling.

Accepted Answer

A) True 
 B)False  False

Question 2

A transaction in which an investor holds a position in the spot market and sells a futures contract or writes a call is

Accepted Answer

A) a gamble 
B) a speculative position 
C) a hedge 
D) a risk-free transaction 
E) none of the above 
A) a gamble 
B) a speculative position 
C) a hedge 
D) a risk-free transaction 
E) none of the above C

Question 3

A risk premium is the additional return investors expect for assuming risk.

Accepted Answer

A) True 
 B)False  True

Question 4

The absence of a daily settlement is one of the factors distinguishing a forward contract from a futures contract.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following are advantages of derivatives?

Accepted Answer

A) lower transaction costs than securities and commodities 
B) reveal information about expected prices and volatility 
C) help control risk 
D) make spot prices stay closer to their true values 
E) all of the above 
A) lower transaction costs than securities and commodities 
B) reveal information about expected prices and volatility 
C) help control risk 
D) make spot prices stay closer to their true values 
E) all of the above

Question 6

Storing an asset entails risk.

Accepted Answer

A) True 
 B)False

Question 7

Arbitrage is a transaction designed to capture profits resulting from market efficiency.

Accepted Answer

A) True 
 B)False

Question 8

A call option gives the holder

Accepted Answer

A) the right to buy something 
B) the right to sell something 
C) the obligation to buy something 
D) the obligation to sell something 
E) none of the above 
A) the right to buy something 
B) the right to sell something 
C) the obligation to buy something 
D) the obligation to sell something 
E) none of the above

Question 9

Derivative markets make stock and bond markets more efficient.

Accepted Answer

A) True 
 B)False

Question 10

Swaps,like options,trade on organized exchanges.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following contracts obligates a buyer to buy or sell something at a later date?

Accepted Answer

A) call 
B) futures 
C) cap 
D) put 
E) swaption 
A) call 
B) futures 
C) cap 
D) put 
E) swaption

Question 12

Most derivative contracts terminate with delivery of the underlying asset.

Accepted Answer

A) True 
 B)False

Question 13

Short selling is a high risk activity.

Accepted Answer

A) True 
 B)False

Question 14

Options,forwards,swaps,and futures are financial assets.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following trade on organized exchanges?

Accepted Answer

A) caps 
B) forwards 
C) options 
D) swaps 
E) none of the above 
A) caps 
B) forwards 
C) options 
D) swaps 
E) none of the above

Question 16

The theoretical fair value is the only value an asset can have.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following instruments are contracts but are not securities

Accepted Answer

A) stocks 
B) options 
C) swaps 
D) a and b 
E) b and c 
A) stocks 
B) options 
C) swaps 
D) a and b 
E) b and c

Question 18

Derivatives permit investors to manage their risk more efficiently.

Accepted Answer

A) True 
 B)False

Question 19

A market in which the price equals the true economic value

Accepted Answer

A) is risk-free 
B) has high expected returns 
C) is organized 
D) is efficient 
E) all of the above 
A) is risk-free 
B) has high expected returns 
C) is organized 
D) is efficient 
E) all of the above

Question 20

Which of the following markets is/are said to provide price discovery?

Accepted Answer

A) futures 
B) forwards 
C) options 
D) a and b 
E) b and c 
A) futures 
B) forwards 
C) options 
D) a and b 
E) b and c

Speculation is equivalent to gambling.

A transaction in which an investor holds a position in the spot market and sells a futures contract or writes a call is

A risk premium is the additional return investors expect for assuming risk.

The absence of a daily settlement is one of the factors distinguishing a forward contract from a futures contract.

Which of the following are advantages of derivatives?

Storing an asset entails risk.

Arbitrage is a transaction designed to capture profits resulting from market efficiency.

A call option gives the holder

Derivative markets make stock and bond markets more efficient.

Swaps,like options,trade on organized exchanges.

Which of the following contracts obligates a buyer to buy or sell something at a later date?

Most derivative contracts terminate with delivery of the underlying asset.

Short selling is a high risk activity.

Options,forwards,swaps,and futures are financial assets.

Which of the following trade on organized exchanges?

The theoretical fair value is the only value an asset can have.

Which of the following instruments are contracts but are not securities

Derivatives permit investors to manage their risk more efficiently.

A market in which the price equals the true economic value

Which of the following markets is/are said to provide price discovery?

Structure of Options Markets

Principles of Option Pricing

Option Pricing Models: the Binomial Model

Option Pricing Models: the Black-Scholes-Merton Model

Basic Option Strategies

Advanced Option Strategies

The Structure of Forward and Futures Markets

Principles of Pricing Forwards, Futures, and Options on Futures

Futures Arbitrage Strategies

Forward and Futures Hedging, Spread, and Target Strategies

Swaps

Interest Rate Forwards and Options

Advanced Derivatives and Strategies

Financial Risk Management Techniques and Applications

Managing Risk in an Organization

Filters

Exam 1: Introduction

Speculation is equivalent to gambling.

A transaction in which an investor holds a position in the spot market and sells a futures contract or writes a call is

A risk premium is the additional return investors expect for assuming risk.

The absence of a daily settlement is one of the factors distinguishing a forward contract from a futures contract.

Which of the following are advantages of derivatives?

Storing an asset entails risk.

Arbitrage is a transaction designed to capture profits resulting from market efficiency.

A call option gives the holder

Derivative markets make stock and bond markets more efficient.

Swaps,like options,trade on organized exchanges.

Which of the following contracts obligates a buyer to buy or sell something at a later date?

Most derivative contracts terminate with delivery of the underlying asset.

Short selling is a high risk activity.

Options,forwards,swaps,and futures are financial assets.

Which of the following trade on organized exchanges?

The theoretical fair value is the only value an asset can have.

Which of the following instruments are contracts but are not securities

Derivatives permit investors to manage their risk more efficiently.

A market in which the price equals the true economic value

Which of the following markets is/are said to provide price discovery?

Structure of Options Markets

Principles of Option Pricing

Option Pricing Models: the Binomial Model

Option Pricing Models: the Black-Scholes-Merton Model

Basic Option Strategies

Advanced Option Strategies

The Structure of Forward and Futures Markets

Principles of Pricing Forwards, Futures, and Options on Futures

Futures Arbitrage Strategies

Forward and Futures Hedging, Spread, and Target Strategies

Swaps

Interest Rate Forwards and Options

Advanced Derivatives and Strategies

Financial Risk Management Techniques and Applications

Managing Risk in an Organization

Filters