Of the following, the most recent derivative security innovations are
A. foreign currency futures.
B. interest rate futures.
C. stock index
... [Show More] futures.
D. stock options.
E. credit derivatives.
E. credit derivatives
By convention, a swap buyer on an interest rate swap agrees to
A. periodically pay a fixed rate of interest and receive a floating rate of interest.
B. periodically pay a floating rate of interest and receive a fixed rate of interest.
C. swap both principal and interest at contract maturity.
D. back both sides of the swap agreement.
E. act as the dealer in the swap agreement.
A. periodically pay a fixed rate of interest and receive a floating rate of interest
An increase in which of the following would increase the price of a call option on common stock, ceteris paribus?
I. Stock price
II. Stock price volatility
III. Interest rates
IV. Exercise price
A. II only
B. II and IV only
C. I, II, and III only
D. I, III, and IV only
E. I, II, III, and IV
C. I, II, and III only
Which of the following is true?
A. Forward contracts have no default risk.
B. Futures contracts require an initial margin requirement be paid.
C. Forward contracts are marked to market daily.
D. Forward contract buyers and sellers do not know who the counterparty is.
E. Futures contracts are only traded over the counter.
B. Futures contracts require an initial margin requirement be paid
A professional futures trader who buys and sells futures for his own account throughout the day but typically closes out his positions at the end of the day is called a
A. floor broker.
B. day trader.
C. position trader.
D. specialist.
E. hedger.
B. day trader
You have agreed to deliver the underlying commodity on a futures contract in 90 days. Today the underlying commodity price rises and you get a margin call. You must have
A. a long position in a futures contract.
B. a short position in a futures contract.
C. sold a forward contract.
D. purchased a forward contract.
E. purchased a call option on a futures contract.
B. a short position in a futures contract
You find the following current quote for the March T-bond contract: $100,000; Pts 32nd, of 100 percent.
You went long in the contract at the open. Which of the following is/are true?
Open 89-12
High 89-24
Low 88-22
Settle 89-22
Open interest 55,210
I. At the end of the day, your margin account would be increased.
II. 55,210 contracts were traded that day.
III. You agreed to deliver $100,000 face value T-bonds in March in exchange for $89,120.
IV. You agreed to purchase $100,000 face value T-bonds in March in exchange for $89,375.
A. I, II, and III only
B. I, II, and IV only
C. I and III only
D. I and IV only
E. IV only
D. I and IV only
A contract that gives the holder the right to sell a security at a preset price only immediately before contract expiration is a(n)
A. American call option.
B. European call option.
C. American put option.
D. European put option.
E. knockout option.
D. European put option
A higher level of which of the following variables would make a put option on common stock more valuable, ceteris paribus?
I. Stock price
II. Stock price volatility
III. Interest rates
IV. Exercise price
A. II only
B. II and IV only
C. I, II, and III only
D. I, III, and IV only
E. I, II, III, and IV
B. II and IV only
A speculator may write a put option on stock with an exercise price of $15 and earn a $3 premium only if he thought
A. the stock price would stay above $12.
B. the stock volatility would increase.
C. the stock price would fall below $18.
D. the stock price would stay above $15.
E. the stock price would rise above $18 or fall below $12.
A. the stock price would stay above $12
You have taken a stock option position and, if the stock's price drops, you will get a level gain no matter how far prices fall, but you could go bankrupt if the stock's price rises. You have________________________________.
A. bought a call option.
B. bought a put option.
C. written a call option.
D. written a put option.
E. written a straddle.
C. written a call option
You have taken a stock option position and, if the stock's price increases, you could lose a fixed small amount of money, but if the stock's price decreases, your gain increases. You must have ________________________________.
A. bought a call option
B. bought a put option
C. written a call option
D. written a put option
E. purchased a straddle
B. bought a put option
In a bear market, which option positions make money?
I. Buying a call
II. Writing a call
III. Buying a put
IV. Writing a put
A. I and II
B. I and III
C. II and IV
D. II and III
E. I and IV
D. II and III
The higher the exercise price, the ________________ the value of a put and the _______________ the value of a call.
A. higher; higher
B. lower; lower
C. higher; lower
D. lower; higher
C. higher; lower
Measured by the amount outstanding, the largest type of derivative market in the world is the
A. futures market.
B. forward market.
C. swap market.
D. options market.
E. credit forward market.
C. swap market [Show Less]