Statements regarding derivative securities

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Reference no: EM131934958

1. Which of the following statements regarding futures trading is incorrect?

A. If you buy a certain futures contract at a certain price, at the delivery date you will have to pay that price and receive the underlying asset.

B. If you sell a certain futures contract at a certain price, at the delivery date you will have to deliver the underlying asset at that price (i.e., you receive the price).

C. Whether you buy or sell a futures contract, you can get out of the contractual obligation by reversing the original trade before the delivery date.

D. Typically, for a particular underlying asst the futures price and the spot price are the same.

2. Which of the following statements regarding derivative securities is incorrect?

A. Derivative securities are sophisticated and dynamic risk management instruments and have no direct bearing on the firm’s financing (stock or bond financing).

B. All derivative securities are traded in organized exchanges.

C. Typical types of derivative securities include forward contracts, futures, options, and swaps.

D. The main purposes of using derivative securities are hedging (risk management) and speculation (active risk-taking investment).

Reference no: EM131934958

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