Reference no: EM133110086

Please Choose the correct answer below. No explanation is needed.

1. If you can exercise option anytime prior to and including the expiration date, the option is an ______ Option

a. Underwater

b. out of the money

c. in the money

d. American style

e. European style

2. The futures price is less than the cash price is an ____ market.

a. arbitrage

b. buyer's

c. parity

d. inverted

e. carrying-charge

3. You will receive a margin call every time your margin:

a. exceeds the required maintenance margin

b. is less than the initial margin

c. increases

d. is less than the required maintenance margin

e. decreases.

4. An option quotation is listed as "GED-BD". The month of expiration is ___ and the strike price is _______

a. July, $10

b. February: $10

c. July: $20

d. February: $20

e. May : $10

5. A futures Contract:

(i) is standardized when traded on an exchange

(II) is a zero-sum game

(III) has a net value of zero

(IV) is a derivative security

a. I and IV only

b. I, II, III and IV

c. I, II and IV only

d. II and III only

e. I and II only

6. which of the following are classified as derivative securities?

a. Preferred stock

b. options

c. money market instruments

d. futures.

7. The two key consideration when determining the delivery mechanism for a futures contract are

a. day of deliveries and low cost

b. location to seller and convenience

c. location to seller and day of delivery

d. location to buyer and day of delivery

e. low cost and convenience

8. if spot-futures parity exists on a financial future , then the future price must equal.

a. future value of the spot price at the risk-free rate

b. future value of the spot price at the market rate

c. present value of the spot price at the risk-free rate

d. spot price

e. present value of the spot price at the market price.

9. In a carrying-charge market, the

a. cash price will exceed the futures price

b. basis will equal zero

c. cash and futures prices create an arbitrage opportunity

d. basis will be negative

e. cash price will equal the future price

10. the primary reasons why commodity futures prices tend to be higher than spot prices is attributed to the cost of:

a. taking delivery and storage

b. arbitrage and interest

c. entering futures contract and taking delivery

d. entering a futures contract and then closing out that position

e. storage and interest