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Quiz 7 Chapter 17
and 18
Chapter 17:
___________________________________________________________________________
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1.
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Today's futures
markets are dominated by trading in _______ contracts.
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2.
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A person with a long
position in a commodity futures contract wants the price of the commodity to
______.
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A.
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decrease
substantially
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B.
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increase
substantially
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D.
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increase or
decrease substantially
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3.
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If an asset price
declines, the investor with a _______ is exposed to the largest potential
loss.
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D.
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short futures
contract
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4.
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The clearing
corporation has a net position equal to ______.
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B.
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the open interest
times 2
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C.
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the open interest
divided by 2
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5.
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The S&P 500 Index
futures contract is an example of a(n) ______ delivery contract. The pork
bellies contract is an example of a(n) ______ delivery contract.
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6.
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Which one of the
following contracts requires no cash to change hands when initiated?
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B.
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Short futures
contract
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7.
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Synthetic stock
positions are commonly used by ______ because of their ______.
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A.
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market timers;
lower transaction cost
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C.
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wealthy investors;
tax treatment
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D.
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money market funds;
limited exposure
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8.
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_____________ are
likely to close their positions before the expiration date, while
____________ are likely to make or take delivery.
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9.
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Futures contracts
have many advantages over forward contracts except that _________.
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A.
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futures positions
are easier to trade
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B.
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futures contracts
are tailored to the specific needs of the investor
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C.
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futures trading
preserves the anonymity of the participants
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D.
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counterparty credit
risk is not a concern on futures
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10.
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An investor who is
hedging a corporate bond portfolio using a T-bond futures contract is said to
have _______.
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11.
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The open interest on
silver futures at a particular time is the number of __________.
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A.
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all outstanding
silver futures contracts
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B.
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long and short
silver futures positions counted separately on a particular trading day
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C.
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silver futures
contracts traded during the day
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D.
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silver futures
contracts traded the previous day
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12.
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An investor who goes
short in a futures contract will _____ any increase in value of the
underlying asset and will _____ any decrease in value in the underlying
asset.
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13.
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An investor who goes
long in a futures contract will _____ any increase in value of the underlying
asset and will _____ any decrease in value in the underlying asset.
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14.
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The advantage that
standardization of futures contracts brings is that _____ is improved because
____________________.
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A.
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liquidity; all
traders must trade a small set of identical contracts
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B.
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credit risk; all
traders understand the risk of the contracts
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C.
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pricing;
convergence is more likely to take place with fewer contracts
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D.
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trading cost;
trading volume is reduced
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15.
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The fact that the
exchange is the counterparty to every futures contract issued is important
because it eliminates _________ risk.
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16.
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In the futures market
the short position's loss is ___________ the long position's gain.
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D.
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sometimes less than
and sometimes greater than
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17.
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A wheat farmer should
__________ in order to reduce his exposure to risk associated with
fluctuations in wheat prices.
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C.
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buy a contract for
delivery of wheat now and sell a contract for delivery of wheat at harvest
time
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D.
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sell wheat futures
if the basis is currently positive and buy wheat futures if the basis is
currently negative
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18.
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Which of the
following provides the profit to a long position at contract maturity?
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A.
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Original futures
price - Spot price at maturity
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B.
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Spot price at
maturity - Original futures price
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19.
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You take a long
position in a futures contract of one maturity and a short position in a
contract of a different maturity, both on the same commodity. This is called
a __________.
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20.
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Interest rate futures
contracts exist for all of the following except
__________.
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21.
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Initial margin is
usually set in the region of ________ of the total value of a futures
contract.
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22.
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Margin must be posted
by ________.
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A.
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buyers of futures
contracts only
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B.
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sellers of futures
contracts only
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C.
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both buyers and
sellers of futures contracts
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23.
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The daily settlement
of obligations on futures positions is called _____________.
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C.
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a variation margin
check
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D.
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the initial margin requirement
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24.
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Which of the
following provides the profit to a short position at contract maturity?
|
A.
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Original futures
price - Spot price at maturity
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B.
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Spot price at
maturity - Original futures price
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25.
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Margin requirements
for futures contracts can be met by ______________.
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B.
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cash or highly
marketable securities such as Treasury bills
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C.
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cash or any
marketable securities
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D.
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cash or warehouse
receipts for an equivalent quantity of the underlying commodity
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26.
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An established value
below which a trader's margin may not fall is called the ________.
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27.
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Which one of the
following is a true statement?
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A.
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A margin deposit
can be met only by cash.
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B.
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All futures
contracts require the same margin deposit.
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C.
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The maintenance
margin is the amount of money you post with your broker when you buy or
sell a futures contract.
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D.
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The maintenance
margin is the value of the margin account below which the holder of a
futures contract receives a margin call.
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28.
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At maturity of a
futures contract, the spot price and futures price must be approximately the
same because of __________.
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B.
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the convergence
property
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D.
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the triple witching
hour
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29.
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A futures contract
__________.
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A.
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is a contract to be
signed in the future by the buyer and the seller of a commodity
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B.
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is an agreement to
buy or sell a specified amount of an asset at a predetermined price on the
expiration date of the contract
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C.
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is an agreement to
buy or sell a specified amount of an asset at whatever the spot price
happens to be on the expiration date of the contract
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D.
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gives the buyer the
right, but not the obligation, to buy an asset some time in the future
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30.
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Which one of the
following exploits differences between actual future prices and their
theoretically correct parity values?
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D.
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Settlement
transactions
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31.
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Which one of the
following refers to the daily settlement of obligations on future
positions?
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B.
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The convergence
property
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D.
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The triple witching
hour
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32.
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The most actively
traded interest rate futures contract is for ___________.
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33.
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The CME weather
futures contract is an example of ______________.
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A.
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a cash-settled
contract
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B.
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an agricultural
contract
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34.
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Single stock futures,
as opposed to stock index futures, are _______________.
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A.
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not yet being
offered by any exchanges
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B.
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offered overseas
but not in the United States
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C.
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currently trading
on One Chicago, a joint venture of several exchanges
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D.
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scheduled to begin
trading in 2015 on several exchanges
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35.
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You are currently
long in a futures contract. You instruct a broker to enter the short side of
a futures contract to close your position. This is called __________.
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36.
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A company that mines bauxite,
an aluminum ore, decides to short aluminum futures. This is an example of
__________ to limit its risk.
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37.
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Futures markets are
regulated by the __________.
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38.
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A hog farmer decides
to sell hog futures. This is an example of __________ to limit risk.
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39.
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On May 21, 2012, you
could have purchased a futures contract from Intrade for a price of $5.70
that would pay you $10 if Barack Obama won the 2012 presidential election.
This tells you _____.
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A.
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that the market
believed that Obama had a 57% chance of winning
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B.
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that the market
believed that Obama would not win the election
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C.
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nothing about the
market's belief concerning the odds of Obama winning
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D.
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that the market
believed Obama's chances of winning were about 43%
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40.
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An investor would
want to __________ to exploit an expected fall in interest rates.
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A.
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sell S&P 500
Index futures
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B.
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sell Treasury-bond
futures
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C.
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buy Treasury-bond
futures
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41.
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Forward contracts
_________ traded on an organized exchange, and futures contracts __________
traded on an organized exchange.
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42.
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If the S&P 500
Index futures contract is overpriced relative to the spot S&P 500 Index,
you should __________.
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A.
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buy all the stocks
in the S&P 500 and write put options on the S&P 500 Index
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B.
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sell all the stocks
in the S&P 500 and buy call options on S&P 500 Index
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C.
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sell S&P 500
Index futures and buy all the stocks in the S&P 500
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D.
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sell short all the
stocks in the S&P 500 and buy S&P 500 Index futures
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43.
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A long hedge is a
simultaneous __________ position in the spot market and a __________ position
in the futures market.
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44.
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Investors who take
short positions in futures contract agree to ___________ delivery of the
commodity on the delivery date, and those who take long positions agree to
__________ delivery of the commodity.
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45.
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An investor would
want to __________ to hedge a long position in Treasury bonds.
|
A.
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buy interest rate
futures
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B.
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buy Treasury bonds
in the spot market
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C.
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sell interest rate
futures
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46.
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Futures contracts are
said to exhibit the property of convergence because _______________.
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A.
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the profits from
long positions and short positions must ultimately be equal
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B.
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the profits from
long positions and short positions must ultimately net to zero
|
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C.
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price discrepancies
would open arbitrage opportunities for investors who spot them
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D.
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the futures price
and spot price of any asset must ultimately net to zero
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47.
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In the context of a
futures contract, the basis is defined as ______________.
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A.
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the futures price
minus the spot price
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B.
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the spot price
minus the futures price
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C.
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the futures price
minus the initial margin
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D.
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the profit on the
futures contract
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48.
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The __________ is
among the world's largest derivatives exchanges and operates a fully
electronic trading and clearing platform.
|
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49.
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Violation of the
spot-futures parity relationship results in _______________.
|
A.
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fines and other
penalties imposed by the SEC
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B.
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arbitrage
opportunities for investors who spot them
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C.
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suspension of
delivery privileges
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