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The Country Farm and the Cookie Maker met today and agreed to exchange wheat six months from now at a price which they   A.  futures contract B.  spot market C.  cash market D.  forward contract E.  CME transaction D.  forward contract
Which one of the following is a contract managed by an organized exchange that allows a buyer and seller to agree on a price today for an exchange of goods that will occur sometime in the future? A.  futures contractB.  forward contract A.  futures contract
A futures price is a price that is negotiated _____ and paid _____.  A.  today; in the future B.  today; today C.  in the future; in the future D.  in the future; today E.  either today or in the future; in the future A.  today; in the future
You have a market position which allows you to profit when market prices increase but causes you a loss when market prices decline. this is what?A.  forward position B.  futures position C.  long position D.  short position C.  long position
When does the holder of a short position realize a profit? A.  when prices rise B.  when prices either remain constant or rise C.  when prices remain constant D.  when prices either remain constant or decline E.  when prices decline E.  when prices decline
An investor who accepts the risk of a loss in exchange for the chance to earn a profit is referred to as which one of the following?   A.  hedger B.  short seller C.  speculator D.  broker E.  dealer C.  speculator
An investor who shifts risk is referred to as which one of the following?   A.  hedger B.  short seller C.  speculator D.  broker E.  dealer A.  hedger
A financial instrument on which a futures contract is based is called which one of the following?   A.  hedged security B.  short position C.  long position D.  speculative asset E.  underlying asset E.  underlying asset
You own 450,000 bushels of wheat. If you decide to add a short futures position in wheat you will be taking which one of the following positions? A.  short hedge B.  long hedge C.  program trade D.  short arbitrage E.  long arbitrage A.  short hedge
A futures position that is equal, but opposite, the position you have in the underlying asset defines which one of the following terms? A.  short hedge B.  long hedge C.  full hedge D.  partial hedge E.  underlying hedge C.  full hedge
A long hedge is the addition of which one of the following to a short position in the underlying asset? A.  short spot positionB.  any spot position C.  any futures positionD. long futures positionE. either a short spot or short futures position D. long futures position
Futures margin is defined as the deposit of funds into a futures trading account for which onA. cover potential losses from outstanding positions B. cover the trading costs and commissions C. cover the future costs of reversing the position A. cover potential losses from outstanding positions
Which one of the following terms applies to the amount of money required when a futures position is first bought or sold? A.  original deposit B.  initial margin C.  spot margin D.  equity deposit E.  mark-to-market B.  initial margin
Which one of the following terms is defined as the process of recognizing gains and losses on outstanding futures positions on a daily basis? A.  margin adjusting B.  daily distributing C.  market adjusting D.  marking-to-market D.  marking-to-market
Which one of the following is the definition of maintenance margin?A.maximum amount of margin permitted for a futures account B. minimum margin required in a futures account at all times C.the minimum amount needed to reverse a futures position B. minimum margin required in a futures account at all times
Which one of the following is a notification to a futures contract holder that additional margin funds are needed?   A.  marking-to-market B.  deposit call C.  shortage notice D.  margin call E.  marking call D.  margin call
Which one of the following is a trade that will close out a previously established futures position?  A.  maintenance call B.  margin call C.  reverse trade D.  position reversal E.  margin closeout C.  reverse trade
Which one of the following is the price of a commodity designated for delivery today?   A.  daily price B.  marked price C.  margin price D.  arbitrage price E.  cash price E.  cash price
Which one of the following is another name for the cash market?  A.  futures market B.  forward market C.  arbitrage market D.  current basis market E.  spot market E.  spot market
Which one of the following is the strategy of earning risk-free profits by taking advantage of any unusual differences between cash and futures prices? A.  cash-futures arbitrageB.  mark-to-marketC.  margin callingD.  basis recognition A.  cash-futures arbitrage
Which one of the following is the definition of the term "basis"? A.  initial cost of purchasing a futures contract B.  future price of a transaction that is agreed upon todayC.  difference between the cash and futures price of a commodity C.  difference between the cash and futures price of a commodity
Which one of the following best defines a carrying-charge market? A.  market where interest is charged on the margin balanceB.  cash price is less than the futures priceC.  positive basis marketD.  spot market price is greater than the cash pric B.  cash price is less than the futures price
The spot price of corn is $5.85 a bushel. The 3-month futures price of corn is $5.80. Which one of the following best describes this market?A.  buyer's marketB.  arbitrage opportunityC.  inverted marketD.  carrying-charge marketE.  market parity C.  inverted market
Assume the futures price of a commodity is equal to the future value of the cash price, calculated at the risk-free rate. Given this, which one of the following commodity?B. humped marketC. inverted marketD. time equilibriumE. spot-futures parity E.  spot-futures parity
Which one of the following terms is defined as the strategy of monitoring the futures price on a stock index in relation to the value A.  parity trading B.  index trading C.  program monitoring D.  inverted arbitrage E.  index arbitrage E.  index arbitrage
Which one of the following entails the use of computers to monitor prices and also to submit trade orders in response to arbitrage opportunities? A.  computer simulation B.  computer hedgingC.  automated monitoringD.  program trading D.  program trading
A farmer has a long position in barley and hedges it with a short position in wheat. Which one of the following terms applies to this situation? A.  cross-arbitrage B.  parity play C.  market arbitrage D.  cross-hedge E.  program trade D.  cross-hedge
When the seller of a futures contract is granted a choice among various assets to deliver, the seller is said to have which one of the following options?A. right-to-choose optionB. spot or futures optionC. cheapest-to-deliver option C. cheapest-to-deliver option
Which one of the following is a difference between a forward contract and a future contract?A.  Forward contracts are based onB.  The price of the asset exchangedC.  A forward contract is a formal agreementD.  Futures contracts are managed D.  Futures contracts are managed through an organized exchange while forward contracts are not.
In 2007, the Chicago Mercantile Exchange merged with which one of the following exchanges? A.  Intercontinental Exchange B.  New York Board of Trade C.  Chicago Board of Trade D.  Coffee, Sugar, and Cocoa Exchange C.  Chicago Board of Trade
Futures contracts exist for which of the following?I. pork belliesII. S&P 500 indexIII. EurodollarsIV. cocoa   E.  I, II, III, and IV
Which of the following features apply to a futures contract?I. zero-sum gameII. derivative securityIII. maturity dateIV. settlement procedure  E.  I, II, III, and IV
Which one of the following statements related to futures contracts is correct? A.  The buyer of the contract has a short position.B.  The buyer of the contract has the rightC.  Futures contracts can be cancelledD.  Both the buyer and the seller D.  Both the buyer and the seller of the contract are obligated to fulfill their duties as outlined in the futures contract.
Which one of the following statements is true regarding futures contracts? A.  Futures prices are generally setB.  Futures contracts generally grant C.  Cost and convenience are tD.  The seller of a futures contract E.  The buyer and seller of C.  Cost and convenience are the two key considerations when establishing the settlement procedures.
What is the normal means of delivery on a Treasury note futures contract?A.  delivery in cashB.  change in registered ownershipC.  direct deposit of cash into the seller's bank account D.  wire transfer of funds from the B.  change in registered ownership
What was the price per pound of December cotton at the end of this trading day? (may coffee, high 138) A.  $0.7885 B.  $0.8036 C.  $0.8059 D.  $0.8063 E.  $0.8090 D.  $0.8063
What is the highest price at which the May coffee futures contract traded during this day? (may coffee, high 138)A.  $1.3715 B.  $1.3800 C.  $137.15 D.  $138.00 E.  $140.20 B.  $1.3800
What price will be used for this day for the mark-to-market per pound on December cotton? A.  $0.7885 B.  $0.8063 C.  $78.85 D.  $80.59 E.  $80.63 B.  $0.8063
In which city does the largest volume of futures trading in the United States occur?   A.  Boston B.  New York C.  Chicago D.  Kansas City E.  Minneapolis C.  Chicago
Corn is currently selling for $6.15 a bushel while the 3-month futures price is $6.20. Carlos A. sell in the spot marketB. sell in the futures marketC. take a long position in the futures marketD. take a short position in the futures market C. take a long position in the futures market
Sugar is currently selling for $0.201 a pound while the 6-month futures price is $0.208. You take a long position in the 6-month sugar futures. Which one of the following pricesA.  $0.198B.  $0.201C.  $0.205D.  $0.208E.  $0.211 A.  $0.198
Lucas owns a large farming operation which encompasses over 5,000 acres of corn. The crop this year is abundaA.  sell in the spot market todayB.  buy in the spot market todayC.  take a long futures positionD.  take a short futures position D.  take a short futures position
You have 50,000 pounds of cotton in storage. You don't want to sell the cotton toA.  short futures position B.  long futures position C.  short spot position D.  long spot position A.  short futures position
You are a baker and need to purchase a substantial amount of wheat flour three months f A.  long position in spot market B.  short position in spot market C.  long position in futures market D.  short position in futures market C.  long position in futures market
Which one of the following describes the typical initial margin requirements for a futures contract?A.  2 to 5 percent of contract valueB.  4 to 8 percent of contract valueC.  5 to 15 percent of contract value C.  5 to 15 percent of contract value on both long and short positions
You can withdraw funds from your margin account?I. marking-to-market deducts funds from II. marking-to-market adds funds to yoIII. margin balance after IV. margin balance after the withdrawal will exceed the initial margin requirement  II and IV only
You currently have a long position in the 3-month futures market. Which one of the following would be a reverse trade to this position? A.  short spot B.  long spot C.  short 3-month futures D.  long 3-month futures E.  short 6-month futures C.  short 3-month futures
Which one of the following statements is correct? A. Futures contracts can be closed out only by contract buyers. B. Futures contracts can be closed out, but only during the weekC. Futures contracts can be closed out by entering a reverse trade C. Futures contracts can be closed out by entering a reverse trade
Which of the following are reasons why commodities may have a negative basis?I. storage costsII. seasonal price fluctuationsIII. transportation costsIV. interest costs  E. I, II, III, and IV
Which one of the following statements is correct concerning an inverted futures market? A.  The basis will be negative.B.  The basis will equal zeroC.  The cash price will equal the futures price.D.  The cash price will exceed the futures price. D.  The cash price will exceed the futures price.
If spot-futures parity exists for an index future then the future price must equal theA. present value of the spot price at the risk-free rateB. future value of the spot price at the risk-free rateC. future value of the spot price at the market rate B. future value of the spot price at the risk-free rate
You are trying to value a 3-month futures contract on a stock. The market rate is 11.2 percent, the RFR is 3.8 percent, the div is 2.6 percent.or $33 a share. future stock price (FT = S(1 – r)^T)? A.  .112B.  .250C.  .026D.  .038 E.  .064 B.  .250
How is a futures contract on the S&P 500 settled? A.  cashB.  shares of stock selected by the contract buyerC.  shares of stock selected by the contract sellerD.  shares of stock equivalent to those in the indexE.  delivery of a Treasury bill A.  cash
You own a diversified investment portfolio and wish to hedge it against market declines. Which one of the following would be best suited as a cross-hedge A.  going long on DJIAB.  going short on S&P 500C.  going long on an index fund B.  going short on S&P 500 index futures
Which of the following are needed to determine the number of stock index futures required to cross-hedge aI. standard deviation of portfolioII. beta of the stock portfolioIII. value of the index futures contractIV. value of the stock portfolio  D. II, III, and IV only
You currently own a stock portfolio that has a beta of 1.2. If you fully hedge your stock portfolio you will effectively change the portfolio's beta to which one of the following? A.  0 B.  1 C.  1/1.2 D.  1.2 E.  1.22 A.  0
A fully-hedged stock portfolio will have a beta equal to which one of the following? A.  an average asset B.  U.S. Treasury billC.  S&P 500 D.  the beta of the stock portfolio exclusive of the hedge B.  U.S. Treasury bill
Which one of the following futures contracts is generally used to hedge a bond portfolio?  A.  S&P 500 index B.  Eurodollar C.  U.S. Treasury notes D.  gold E.  LIBOR rates C.  U.S. Treasury notes
The duration of an interest rate futures contract is equal to the summation:I. duration of the instrument most likely to be usedII. duration of the underlying instrumentIII. initial length of time of the futuresIV. time remaining on the futures E. II and IV only
What is the closing value of one September futures contract on wheat? (corn open 615.50) A.  $8.110 B.  $811.00 C.  $40,550 D.  $405,500 E.  $4,055,000 C.  $40,550
You purchased five September wheat futures contracts at the open today and sold those contracts at the close. What is your total profit or loss on these contracts?A. -$750,000B. -$75,000C. -$7,500D. -$750E. -$75 D. -$750
You purchased four September corn futures contracts at what turned out to be the lowest price of the day and sold those contracts at today's close. A. -$287.50B. -$1,100C. -$2,875D. $1,100E. $14,250 D. $1,100
By how much did one September futures contract on wheat vary during today's trading? A. $.115B. $1.15C. $11.50D. $115.00E. $575.00 E. $575.00
What is the absolute price difference on a $100,000, 5-year Treasury note futures contract between the high and low prices?Treasury note, $100,000, pts and one-quarter A. $428.13B. $512.08C. $625.33D. $787.50E. $811.33 D. $787.50
What is the price difference on a $100,000, 10-year Treasury note futures contract between the highest and lowest prices at which the bond traded on this day? A. $106.50B. $1,065.00C. $1,203.13D. $10,650.00E. $12,031.30 C. $1,203.13
What is the difference between this day's high and closing prices for one 10-year Treasury note futures contract A. -$435.00B. -$550.00C. -$800.00D. -$971.88E. -$1,093.75 E. -$1,093.75
What is the difference in the value of one November heating oil contract between this day's opening and closing prices? A. $59.40B. $249.48C. $2,494.80D. $2,970.00E. $5,940.00 C. $2,494.80
What is the amount of the difference between the highest and the lowest value of a November heating oil contract on this day? A. $79.10B. $83.70C. $106.90D. $118.00E. $122.40 B. $83.70
You own six November crude oil futures contracts. What is the settlement value of those contracts at the end of this trading day? A. $736,200B. $736,260C. $746,400D. $746,500E. $747,000 C. $746,400
Southern Fuel has an inventory of 756,000 gallons of heating oil. The futures contracts on heating oil are based on 42,000 gallons. A. long on 16B. long on 17C. short on 18D. short on 19E. short on 20 C. short on 18
Southern Fields has an inventory of 838,000 pounds of sugar. The firm placed a partial hedge on this inventory by selling 6 futures contracts at 9.56. A. $470.40B. $586.60C. $688.20D. $4,704.00E. $5,866.00 A. $470.40
The Shirt Factory purchased 10 futures contracts on cotton at a quoted price of 71.14 as a hedge against its inventory needs. At the time it actually needed the cotton, A. $90B. $560C. $1,280D. $2,100E. $3,000 D. $2,100
Will purchased 3 futures contracts on corn. The contract size is 5,000 bushels and the price is quoted in cents per bushel. Assume the initial margin requirement is 4.5% A. $140.40B. $421.20C. $1,404D. $2,808E. $4,212 E. $4,212
Your broker requires an initial margin of $1,500 and a maintenance margin of $1,000 on Treasury note futures. Treasury n A. no margin callB. call for $1,037.50C. call for $937.50D. call for $1,100E. call for $1,287.50 E. call for $1,287.50
Your broker requires an initial margin of $6,075 per futures contract on wheat and a maintenance margin of $4,500 per contract. A. no margin callB. call for $475C. call for $1,100D. call for $4,750E. call for $11,000 A. no margin call
Your broker requires an initial margin of $4,500 per futures contract on soybeans and a maintenance margin of $3,000 per contract. A. no margin callB. call for $1,425C. call for $2,487D. call for $4,650E. call for $8,000 E. call for $8,000
You purchased two futures contracts on soybeans at a price quote of 1344?0. The initial margin requirement is $4,750 per contract and the maintenance margin is $3,500 per contract. A. 1314?0B. 1315?0C. 1319?0D. 1322?0E. 1325?0 C. 1319?0
The spot price on cocoa is $2,880 a ton. The futures price is $2,760 a ton. The basis is _____ and the market is a(n) _____ market. A. -120; carrying-chargeB. -120; invertedC. 20; invertedD. 120; carrying-chargeE. 120; inverted E. 120; inverted
The spot price on orange juice is 121.55 cents per pound. The futures price is 124.30. The basis is _____ and the market is a(n) _____ market. A. -2.75; carrying-chargeB. -2.75; invertedC. 1.75; invertedD. 2.75; carrying-chargeE. 2.75; inverted A. -2.75; carrying-charge
The spot price for a non-dividend-paying stock is $24. The risk-free rate is 2.8 percent and the market rate is 10.6 percent. A. $24.33B. $24.41C. $24.54D. $24.59E. $24.70 A. $24.33
The 4-month futures price on a non-dividend-paying stock is $23.60. The risk-free rate is 2.25 percent and the market rate is 10.45 percent. A. $23.39B. $23.43C. $23.51D. $23.64E. $23.78 B. $23.43
The spot rate on a non-dividend-paying stock is $15.70. The risk-free rate is 3.15 percent and the market rate is 10.75 percent. What is the three-month futures rate if spot-futurA. $15.48B. $15.82C. $16.01D. $16.13E. $16.24 B. $15.82
The spot rate on a non-dividend-paying stock is $42.30. The risk-free rate is 3.75 percent and the market rate is 11.50 percent. What is the three-month futures rate if spot-futures parity A. $42.14B. $42.54C. $42.69D. $42.82E. $43.89 C. $42.69
The 6-month futures price on a non-dividend-paying stock is $36.20. The risk-free rate is 2.75 percent and the market rate is 9.60 percent. What is the spot rate for this stock if spot-futures parityA. $35.43B. $35.71C. $36.30D. $36.70E. $36.99 B. $35.71
A stock is currently selling for $28 a share and has a dividend yield of 3.2 percent. The risk-free rate is 2.5 percent. What is the 6-month futures price on this stock? A. $27.66B. $27.90C. $28.02D. $28.10E. $28.35 B. $27.90
A stock is currently selling for $38.50 a share and has a dividend yield of 1.75 percent. The risk-free rate is 3.5 percent. What is the 2-month futures price on this stock? A. $38.27B. $38.41C. $38.56D. $38.61E. $38.70 D. $38.61
You purchased 3 DJIA index futures at a price of 13,200. The contract size is $10 times the level of the index. The futures are maturing today when the price is 12,758. A. -$1,326B. -$1,408C. -$13,260D. -$14,080E. -$15,260 C. -$13,260
Julie purchased four (4) S&P 500 index futures at a price of 1392. The contract size is $250 times the index value. The futures are maturing today at a price of 1387.50.A. -$3,125B. -$4,500C. -$5,625D. -$13,575E. -$15,625 B. -$4,500
You own a portfolio which is valued at $6.4 million and which has a beta of 1.27. You would like to create a riskless portfolio A. short 16 contractsB. short 18 contractsC. short 23 contractsD. long 18 contractsE. long 23 contracts C. short 23 contracts
You own a portfolio which is valued at $12.5 million and which has a beta of 1.42. You would like to create a riskless A. short 68 contractsB. short 50 contractsC. long 41 contractsD. long 57 contractsE. short 63 contracts B. short 50 contracts
You own a 6-month futures contract on U.S. Treasury notes. The underlying notes have a duration of 3.87 years. What is the duration of the futures contract? A. 3.37 yearsB. 3.67 yearsC. 3.87 yearsD. 4.12 yearsE. 4.37 years E. 4.37 years
The duration of a 3-month Treasury futures contract is 3.46 years. What is the duration of the underlying Treasury note? A. 2.98 yearsB. 3.11 yearsC. 3.21 yearsD. 3.36 yearsE. 3.48 years C. 3.21 years
You manage a $265 million bond portfolio which has a duration of 7.1 years. You want to hedge this portfolio with Treasury no A. 1,371 contractsB. 1,400 contractsC. 1,550 contractsD. 1,867 contractsE. 2,134 contracts E. 2,134 contracts
Jackie manages a $620 million bond portfolio which has a duration of 4.05 years. A. 4,667 contractsB. 4,868 contractsC. 4,949 contractsD. 5,183 contractsE. 5,216 contracts C. 4,949 contracts

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