Quiz
Series 3 section 1
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Questions in this quiz (35)
11) Futures markets provide important functions they:
- AProvide forward pricing
- BAttract speculators
- CAssemble, standardize and grace commodities
- DAll of the above
22) The hedgers primary motive in the future's market is risk transfer:
- ATrue
- BFalse
33) Offsetting a futures contract requires delivery;
- ATrue
- BFalse
44) When trading futures contracts, transfer of title to the commodity does not occur until;
- AMargin has been deposited
- BThe contract is offsett
- CDelivery takes place
- DTitle transfer is prohibited
55) Futures markets are standardized, allowing large numbers of trades to occur. Because of the frequent trades and market liquidity, cash prizes often "key" off the futures prices. Without futures markets and hedging, commodities prices would probably be;
- ALess volatile
- BIn equilibrium
- CHigher
- DLower
66) Most business people buy and or sell economic goods. In this process, they are subject to the risk of price fluctuation. Anyone who subjects himself to price fluctuation by buying or selling economic goods is a;
- ASpeculator
- BSpreader
- CGambler
- DHedger
77) To hedge against prices rising before a future purchase:
- ABuy futures
- BSell futures
- CSpread
- DNone of the above
88) Selling futures against an insured growing crop is:
- ASpeculating
- BSpreading
- CHedging
- DGambling
99) There are several ways to refer to a long hedge: a long hedge, a buy hedge, and substitute purchase. A long hedge:
- AProtects against rising prices
- BTransfers risk to another hedger with long futures position
- CIs used by grain farmers to hedge crops
- DAll of the above
1010) Cash and futures markets may differ in:
- AInspection procedures
- BCommodity grade
- CAbility to offset before delivery
- DAll of the above
1111) A cash forward sale is the same as a futures contract sale except for the ability to offset in futures, the standardization of futures specifications, and trading of futures contracts by open outcry or computer matching of bids and offers on organized exchanges;
- ATrue
- BFalse
1212) The futures market speculator assumes price risk transferred by hedgers, and provides liquidity:
- ATrue
- BFalse
1313) There are two types of options: calls and puts. A call option is the right to sell the underlying asset within a certain time period at a specified price:
- ATrue
- BFalse
1414) Speculators provide volume or liquidity to the market. Without sufficient speculative volume, a contracts price will tend to display increased volatility:
- ATrue
- BFalse
1515) Forward contracts are different from futures contracts because forward contracts are:
- ANon standard
- BNon regulated
- CNon competitive
- DAll of of the above
1616) A speculator initiates a short futures position in Swiss francs on the Chicago Mercantile Exchange. He:
- ASold Swiss franc futures
- BBeloved the Swiss franc will decline
- CWill need to buy Swiss franc futures to close his position if he wants to avoid making delivery
- DAll of the above
1717) A short hedger in crude oil futures:
- AIs long the crude (has the physical commodity)
- BPlans on selling crude oil at a future date
- CIs probably going to buy back his futures and deliver his crude in the cash market
- DAll of the above
1818) Long hedgers take a long position in the futures market to counteract their short cash position. Being "short the cash" means:
- AThey are producing the physical commodity for sale
- BThey are currently storing the physical commodity
- CThey do not currently have the physical commodity, but will need to buy it in the future
- DThey don't have the money to pay for the physical commodity they need
1919) A long put Futures option has the right to sell the underlying asset at a specified price during a certain time period. If the option purchaser exercises:
- AThe put purchaser receives a short Futures position at the strike price; the put writer receives a long Futures position at the strike price
- BThe put purchaser receives a long future's position at the strike price, the put writer receives a short Futures position at the strike price
- CThe put purchaser delivers the physical commodity to the put writer at the strike price
- DThe put purchaser will have to sell at the current market price to close his position if he did not already have a short Futures position when he exercised
2020) A speculator writes a November corn futures call
- AHe expects corn prices to rise. If they do, he gets to keep the premium
- BHe expects to corn prices to decline. If they do, he gets to keep the premium
- CHe expects corn prices to decline. If they do, he will sell corn futures at the strike price
- DHe expects corn prices to stay the same. If they do, he will sell corn futures at the strike price
2121) A futures option is a wasting asset. This means that in a flat market, a call seller will:
- ALose the premium the received from the call purchaser
- BKeep the premium he received from the call purchaser
- CPay a margin call
- DBe likely to have the call exercised
2222) Futures and futures options may differ in the following ways except:
- ATheir wasting natures
- BTheir risk
- CTheir limited duration
- DTheir delivery dates
2323) A long futures put position has the right but not the obligation to sell a futures contract:
- ATrue
- BFalse
2424) An option purchaser is liable only to the extent of the premium paid: therefore, his risk is limited
- ATrue
- BFalse
2525) Prices in distant commodity months tend to be higher than in nearby months due to carrying charges: however there are times when the nearby month is at a premium to the deferred months. When this phenomenon occurs the market is described as:
- AA premium market
- BA normal market
- CAn inverted market
- DA discounted market
2626) Corn prices for the various months are: May 296, Jul 292, Sep 279, Dec 275.5. What does this price pattern suggest?
- AStrong long term demand
- BStrong demand for various futures months
- CStrong cash market supplies
- DCash market shortage
2727) Futures contracts are standardized with regard to all of the following except:
- AQuality
- BPoint of delivery
- CMargin requirements
- DTime of delivery
2828) All of the following are examples of long hedges except:
- ACattle rancher who needs feed for his cattle
- BDie casting business requiring a metals inventory
- CFilm Manufacturers needing silver
- DA corn farmer needing to sell his corn
2929) An omnibus account: an account with a futures commission house in which the transactions and identification of two or more persons are combined and not disclosed
- ATrue
- BFalse
3030) In an effort to assure the financial integrity of the marketplace, clearinghouses have set up a fund into which clearing members contribute a percentage of their gross revenues. This fund is known as the:
- ASurplus fund
- BMembership fund
- CGuarantee fund
- DSlush fund
3131) Leverage in future's speculation results from:
- ALow margin requirements
- BHigh price volatility
- CChange in basis
- DOnly 3% of contracts going into delivery
3232) As market volatility decreases financial leverage increases in trading
- ATrue
- BFalse
3333) both cash market bondholders and traders with a long T bond futures position have the right to receive interest payments and, at the maturity of the bond, a return of principal
- ATrue
- BFalse
3434) when comparing margin, generally the purchaser must put up
- AStocks and bonds, 20%; SFPS, 50%; other futures, 5-10%
- BStocks and bonds, 5-10%; SFPS, 50%; other futures, 20%
- CStocks and bonds, 50%; SFPS, 5-10%; other futures, 20%
- DStocks and bonds, 50%; SFPS, 20%; other futures, 5-10%
3535) For stocks and bonds, title is transferred through a market maker. With futures contracts, title to the underlying commodity does not transfer unless the contract is delivered
- ATrue
- BFalse
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- Description
- Investment Teaching Quiz on Series 3 section 1, created by Arthur Cervantes on 04/09/2017.
- Author
- Arthur Cervantes
- Language
- English
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