User Account

All Pages

Forward contract to exchange cash flows based on level

Assignment Help Financial Management
Reference no: EM131307958

1. Which of the following is true?

a. Forward contracts have no default risk.

b. Forward contracts are marked to market daily.

c. Forward contract buyers and sellers do not know who the counterparty is.

d. Futures contracts require an initial margin requirement be paid.

e. Futures contracts are only traded over the counter.

2. A long contract requires that the investor

a. sell securities in the future.

b. buy securities in the future.

c. hedge in the future.

d. close out his position in the future.

3. In most of the world's futures trading markets/exchanges, trading occurs using

a. floor brokers and specialists.

b. electronic trading platforms.

c. open-outcry auctions.

d. dealers trading from inventory.

4. Because the exchange serves as the counterparty to each trade, buyers and sellers of futures contracts are required to post margin. A daily mark to market occurs to adjust the margin accounts for changes in the value of the contract. If you are long futures, price _______________ over time will cause your margin account to decrease, which may lead to required payment of additional margin if the account reaches its _________________ level.

a. increases; initial margin

b. increases; maintenance margin

c. decreases; initial margin

d. decreases; maintenance margin

5. A forward contract to exchange cash flows based on the level of a specific interest rate index is called a(n)

a. forward rate agreement (FRA).

b. interest rate forward.

c. futures contract.

d. forward option.

Reference no: EM131307958

Questions Cloud

Dividends will be paid on the stock over the next nine years : Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $15 per share dividend 10 years from today ..
An all-pro defensive lineman is in contract negotiations : An All-Pro defensive lineman is in contract negotiations. The team has offered the following salary structure: All salaries are to be paid in lump sums. The player has asked you as his agent to renegotiate the terms. He wants a $11 million signing bo..
Returns and probabilities for the three possible states : Given the returns and probabilities for the three possible states listed here, calculate the covariance between the returns of Stock A and Stock B. For convenience, assume that the expected returns of Stock A and Stock B are 0.11 and 0.15, respective..
Calculate firms cash conversion cycle : Winston Inc. is trying to determine the effect of its inventory turnover ratio and days sales outstanding on its cash conversion cycle. Winston's 2013 sales (all on credit) were $168,000 and its cost of goods sold was 75% of sales. calculate the firm..
Forward contract to exchange cash flows based on level : A long contract requires that the investor. In most of the world's futures trading markets/exchanges, trading occurs using. A forward contract to exchange cash flows based on the level of a specific interest rate index is called a(n)
Statements about regulatory and legal issues : Which of the following statements about regulatory and legal issues is most correct? States require licensure of certain healthcare providers to limit the number of providers. Healthcare managers must grapple with several legal issues, but there are ..
Provides the greatest annual return : Which of the following provides the greatest annual return?
Statements about the income statement : Which of the following statements about the income statement is most correct?
What is the dollar amount of dividends that he received : Lee purchased a stock one year ago for $27. The stock is now worth $31, and the total return to Lee for owning the stock was 0.36. What is the dollar amount of dividends that he received for owning the stock during the year?

Reviews

Write a Review

Financial Management Questions & Answers

  What is new divisor for the price-weighted index

Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $37, $312, and $94, respectively. If Baker undergoes a 2-for-1 stock split, what is the new divisor for the price-weighted index?

  Explain after-tax rate of return on assets before retirement

Tara, age 44, plans to retire at age 67. Her life expectancy, accounting for family medical history, is age 97. Tara is single and currently earns $56,000 per year as a university librarian.

  What financial criteria should be considered

Why are loan payments under the simple interest method usually lower than loan payments under the add-on interest method?

  Calculate eac for both the models

Model A costs $9,300 and is expected to run for 7 years; The annual maintenance costs are $820 for model A. Model B costs $15,900 and has an expected life of 9 years; The annual maintenance cost are $710 for model B. Assume that the opportunity cost ..

  Annual percentage rate on your credit card

The annual percentage rate (APR) on your credit card is 14.5% (monthly compounded). During the first week of school, you racked up $700 in credit card debt. You do not have access to a cheaper source of financing, and you definitely do not want to te..

  What are cost of equity and weighted average cost of capital

Grace Fine Dining Trust is financed 100 percent with equity and intends to retain this way. Grace's common stock beta is 1.20, the expected market return (average market return) is 12 percent, and the risk-free rate is 5 percent. What are the cost of..

  What is the company target debt-equity ratio

Fama's Llamas has a weighted average cost of capital of 11.5 percent. The company's cost of equity is 17 percent, and its pretax cost of debt is 8 percent. The tax rate is 33 percent. What is the company's target debt-equity ratio?

  What is the maximum initial cost the company

Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.86 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. What is the maximum initial cost the co..

  Explain what would be the value of the fulton bonds

Determine the value of a $1,000 denomination Fulton bond as of April 15, 2010 to an investor who holds the bond until maturity and whose required rate of return is

  Statement of cash flows is the last of four financial

The statement of cash flows is the last of the four financial statements we discussed. Explain why this statement is important to investors and how it complements the income statement and balance sheet. You should be able to answer this question in s..

  Nonconstant growth valuation

A company currently pays a dividend of $3.75 per share (D0 = $3.75). It is estimated that the company's dividend will grow at a rate of 25% per year for the next 2 years, then at a constant rate of 7% thereafter. The company's stock has a beta of 1.1..

  Performing the analysis from the perspective of an investor

Imagine that you have $100,000 to invest. You are going to invest it all in one investment for the next 5 years at which point you will revaluate both your investment and personal situations. You will be performing the analysis from the perspective o..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd