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MCQS Investment
MCQS Investment
(5) The basic difference between speculators and hedgers in futures contracts is that
speculators:
a) Will profit regardless of the direction of price change.
b) Are not protecting their commodity holdings.
c) Are concerned only with long-term price movements.
d) Take a position in more than one commodity at a time.
(6) Why are most futures contracts not settled through delivery of the product?
a) Most contracts are settled through the margin account.
b) Most contracts expire with neither party having an obligation to the other party.
c) Most participants cancel their futures contracts through purchase of an option contract.
d) It is easier and cheaper to settle in cash or by offset
(7) Which of the following statements about futures contracts is wrong?
a) A futures contract is a marketable forward contract
b) Futures contracts have standardized features and a clearinghouse to mitigate default
risk
c) Futures contracts can be used to fix the future selling price regardless of future changes
in spot market prices
d) The basis in futures is similar to a basis point in banks
(8) The basis is defined as:
a) spot price minus forward price
b) futures price minus forward price
c) forward price minus spot price
d) spot price minus futures price
(9) The cash price of wheat today is 410 cents per bushel, and the three-month futures price of
the same is 421 cents per bushel. The basis is:
a) -31 cents
b) 11 cents
c) -11 cents
d) 421 cents
(10) If a farmer buys a corn option on futures:
a) The farmer has the right to deliver the corn, and will do so only if the price is favorable
b) The farmer must accept a corn futures contract, and not take physical possession of the
corn
c) The farmer must deliver the corn at a fixed price
d) The farmer must deliver the corn at the market price
(11) Standardized futures contracts exist for all of the following underlying assets except:
a) Gold.
b) Stock indexes.
c) Treasury bonds.
d) Common stocks.
(12) Which of the following is false?
a) Futures contracts allow fewer delivery options than forward contracts.
b) Futures contracts are more liquid than forward contracts.
c) Futures contracts are marked to market.
d) Futures contracts trade on a financial exchange.
(13) Which of the following does the most to reduce default risk for futures contracts?
a) High liquidity.
b) Flexible delivery arrangements.
c) Marking to market.
d) Credit checks for both buyers and sellers.
(14) Using futures contracts to transfer price risk is called:
a) Speculating.
b) Hedging.
c) Diversifying.
d) Arbitrage.
(15) Which of the following has the right to sell an asset at a predetermined price?
a) A call buyer.
b) A call writer.
c) A put buyer.
d) A put writer.