Question 1

You purchased one oil future contract at $70 per barrel.What would be your profit (loss)  at maturity if the oil spot price at that time is $73.12 per barrel? Assume the contract size is 1,000 barrels and there are no transactions costs.

Accepted Answer

A)  $3.12 profit
B)  $31.20 profit
C)  $3.12 loss
D)  $31.20 loss
E)  None of the options are correct.F) B) and E)
G) None of the above

Question 2

Which one of the following statements regarding "basis" is true? I)  The basis is the difference between the futures price and the spot price.
II)  The basis risk is borne by the hedger.
III)  A short hedger suffers losses when the basis decreases.
IV)  The basis increases when the futures price increases by more than the spot price.

Accepted Answer

A)  I only
B)  II only
C)  III only
D)  IV only
E)  I, II, and IV.F) D) and E)
G) All of the above

Question 3

To hedge a long position in Treasury bonds, an investor would most likely

Accepted Answer

A)  buy interest rate futures.
B)  sell S&P futures.
C)  sell interest rate futures.
D)  buy Treasury bonds in the spot market.E) C) and D)
F) B) and D)

Question 4

Foreign currency futures contracts are actively traded on the

Accepted Answer

A)  euro.
B)  British pound.
C)  drachma.
D)  euro and British pound.E) A) and B)
F) None of the above

Question 5

If you determine that the DAX-30 Index futures is underpriced relative to the spot DAX-30 Index, you could make an arbitrage profit by

Accepted Answer

A)  buying all the stocks in the DAX-30 and selling put options on the DAX-30 Index.
B)  selling short all the stocks in the DAX-30 and buying DAX-30 futures.
C)  selling all the stocks in the DAX-30 and buying call options on the DAX-30 Index.
D)  buying DAX-30 Index futures and selling all the stocks in the DAX-30.E) A) and C)
F) All of the above

Question 6

If you determine that the S&P 500 Index futures is overpriced relative to the spot S&P 500 Index, you could make an arbitrage profit by

Accepted Answer

A)  buying all the stocks in the S&P 500 and selling put options on the S&P 500 Index.
B)  selling short all the stocks in the S&P 500 and buying S&P Index futures.
C)  selling all the stocks in the S&P 500 and buying call options on the S&P 500 Index.
D)  selling S&P 500 Index futures and buying all the stocks in the S&P 500.E) B) and C)
F) A) and B)

Question 7

Financial futures contracts are actively traded on the following indices except

Accepted Answer

A)  the All ordinary index.
B)  the DAX 30 Index.
C)  the CAC 40 Index.
D)  the Toronto 35 Index.
E)  All of the options are correct.F) D) and E)
G) A) and E)

Question 8

To exploit an expected decrease in interest rates, an investor would most likely

Accepted Answer

A)  buy Treasury bond futures.
B)  take a long position in wheat futures.
C)  buy S&P 500 Index futures.
D)  take a short position in Treasury bond futures.E) A) and D)
F) B) and C) A

Question 9

Some of the newer futures contracts include I)  fashion futures.
II)  weather futures.
III)  electricity futures.
IV)  entertainment futures.

Accepted Answer

A)  I and II
B)  II and III
C)  III and IV
D)  I, II, and IIIE) A) and B)
F) B) and C)

Question 10

Agricultural futures contracts are actively traded on

Accepted Answer

A)  corn.
B)  oats.
C)  pork bellies.
D)  corn and oats.
E)  All of the options are correct.F) B) and D)
G) None of the above E

Question 11

An investor with a long position in Treasury notes futures will profit if

Accepted Answer

A)  interest rates decline.
B)  interest rates increase.
C)  the prices of Treasury notes decrease.
D)  the price of the S&P 500 Index increases.E) A) and B)
F) B) and D)

Question 12

On April 1, you sold one S&P 500 Index futures contract at a futures price of 1,550.If, on June 15, the futures price was 1,612, what would be your profit (loss)  if you closed your position (without considering transactions costs) ?

Accepted Answer

A)  $1,550 loss
B)  $15,550 loss
C)  $15,550 profit
D)  $1,550 profitE) A) and B)
F) B) and D)

Question 13

In a futures contract, the futures price is

Accepted Answer

A)  determined by the buyer and the seller when the delivery of the commodity takes place.
B)  determined by the futures exchange.
C)  determined by the buyer and the seller when they initiate the contract.
D)  determined independently by the provider of the underlying asset.E) A) and D)
F) None of the above

Question 14

A trader who has a __________ position in oil futures believes the price of oil will __________ in the future.

Accepted Answer

A)  short; increase
B)  long; increase
C)  short; stay the same
D)  long; stay the sameE) All of the above
F) C) and D)

Question 15

On January 1, the listed spot and futures prices of a Treasury bond were 95.4 and 95.6.You sold $100,000 par value Treasury bonds and purchased one Treasury bond futures contract.One month later, the listed spot price and futures prices were 95 and 94.4, respectively.If you were to liquidate your position, your profits would be a

Accepted Answer

A)  $125 loss.
B)  $125 profit.
C)  $1,060.50 loss.
D)  $1,062.50 profit.
E)  None of the options are correct.F) A) and B)
G) B) and C)

Question 16

With regard to futures contracts, what does the word "margin" mean?

Accepted Answer

A)  It is the amount of the money borrowed from the broker when you buy the contract.
B)  It is the maximum percentage that the price of the contract can change before it is marked to market.
C)  It is the maximum percentage that the price of the underlying asset can change before it is marked to market.
D)  It is a good-faith deposit made at the time of the contract's purchase or sale.E) None of the above
F) C) and D) D

Question 17

If a trader holding a long position in corn futures fails to meet the obligations of a futures contract, the party that is hurt by the failure is

Accepted Answer

A)  the offsetting short trader.
B)  the corn farmer.
C)  the clearinghouse.
D)  the broker.E) B) and C)
F) A) and D)

Question 18

You sold one corn future contract at $2.29 per bushel.What would be your profit (loss)  at maturity if the corn spot price at that time were $2.10 per bushel? Assume the contract size is 5,000 bushels and there are no transactions costs.

Accepted Answer

A)  $950 profit
B)  $95 profit
C)  $950 loss
D)  $95 lossE) A) and B)
F) A) and C)

Question 19

A trader who has a __________ position in gold futures wants the price of gold to __________ in the future.

Accepted Answer

A)  long; decrease
B)  short; decrease
C)  short; stay the same
D)  short; increaseE) A) and D)
F) B) and D)

Question 20

Which one of the following statements regarding "basis" is not true?

Accepted Answer

A)  The basis is the difference between the futures price and the spot price.
B)  The basis risk is borne by the hedger.
C)  A short hedger suffers losses when the basis decreases.
D)  The basis increases when the futures price increases by more than the spot price.E) B) and C)
F) A) and D)

Exam 22: Futures Markets

You purchased one oil future contract at $70 per barrel.What would be your profit (loss) at maturity if the oil spot price at that time is $73.12 per barrel? Assume the contract size is 1,000 barrels and there are no transactions costs.

Correct Answer
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Correct Answer
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To hedge a long position in Treasury bonds, an investor would most likely

Correct Answer
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Foreign currency futures contracts are actively traded on the

Correct Answer
verified

If you determine that the DAX-30 Index futures is underpriced relative to the spot DAX-30 Index, you could make an arbitrage profit by

Correct Answer
verified

If you determine that the S&P 500 Index futures is overpriced relative to the spot S&P 500 Index, you could make an arbitrage profit by

Correct Answer
verified

Financial futures contracts are actively traded on the following indices except

Correct Answer
verified

To exploit an expected decrease in interest rates, an investor would most likely

Correct Answer
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A

Some of the newer futures contracts include I) fashion futures. II) weather futures. III) electricity futures. IV) entertainment futures.

Correct Answer
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Agricultural futures contracts are actively traded on

Correct Answer
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E

An investor with a long position in Treasury notes futures will profit if

Correct Answer
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On April 1, you sold one S&P 500 Index futures contract at a futures price of 1,550.If, on June 15, the futures price was 1,612, what would be your profit (loss) if you closed your position (without considering transactions costs) ?

Correct Answer
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In a futures contract, the futures price is

Correct Answer
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A trader who has a position in oil futures believes the price of oil will in the future.

Correct Answer
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Correct Answer
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With regard to futures contracts, what does the word "margin" mean?

Correct Answer
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D

If a trader holding a long position in corn futures fails to meet the obligations of a futures contract, the party that is hurt by the failure is

Correct Answer
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You sold one corn future contract at $2.29 per bushel.What would be your profit (loss) at maturity if the corn spot price at that time were $2.10 per bushel? Assume the contract size is 5,000 bushels and there are no transactions costs.

Correct Answer
verified

A trader who has a position in gold futures wants the price of gold to in the future.

Correct Answer
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Which one of the following statements regarding "basis" is not true?

Correct Answer
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Exam 22: Futures Markets

You purchased one oil future contract at $70 per barrel.What would be your profit (loss) at maturity if the oil spot price at that time is $73.12 per barrel? Assume the contract size is 1,000 barrels and there are no transactions costs.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To hedge a long position in Treasury bonds, an investor would most likely

Correct AnswerverifiedShow Answer

Foreign currency futures contracts are actively traded on the

Correct AnswerverifiedShow Answer

If you determine that the DAX-30 Index futures is underpriced relative to the spot DAX-30 Index, you could make an arbitrage profit by

Correct AnswerverifiedShow Answer

If you determine that the S&P 500 Index futures is overpriced relative to the spot S&P 500 Index, you could make an arbitrage profit by

Correct AnswerverifiedShow Answer

Financial futures contracts are actively traded on the following indices except

Correct AnswerverifiedShow Answer

To exploit an expected decrease in interest rates, an investor would most likely

Correct AnswerverifiedA

Some of the newer futures contracts include I) fashion futures. II) weather futures. III) electricity futures. IV) entertainment futures.

Correct AnswerverifiedShow Answer

Agricultural futures contracts are actively traded on

Correct AnswerverifiedE

An investor with a long position in Treasury notes futures will profit if

Correct AnswerverifiedShow Answer

On April 1, you sold one S&P 500 Index futures contract at a futures price of 1,550.If, on June 15, the futures price was 1,612, what would be your profit (loss) if you closed your position (without considering transactions costs) ?

Correct AnswerverifiedShow Answer

In a futures contract, the futures price is

Correct AnswerverifiedShow Answer

A trader who has a __________ position in oil futures believes the price of oil will __________ in the future.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

With regard to futures contracts, what does the word "margin" mean?

Correct AnswerverifiedD

If a trader holding a long position in corn futures fails to meet the obligations of a futures contract, the party that is hurt by the failure is

Correct AnswerverifiedShow Answer

You sold one corn future contract at $2.29 per bushel.What would be your profit (loss) at maturity if the corn spot price at that time were $2.10 per bushel? Assume the contract size is 5,000 bushels and there are no transactions costs.

Correct AnswerverifiedShow Answer

A trader who has a __________ position in gold futures wants the price of gold to __________ in the future.

Correct AnswerverifiedShow Answer

Which one of the following statements regarding "basis" is not true?

Correct AnswerverifiedShow Answer

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A

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E

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A trader who has a position in oil futures believes the price of oil will in the future.

Correct Answer
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D

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A trader who has a position in gold futures wants the price of gold to in the future.

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