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50. The process of marking a futures contract to market means that:
51. A soybean oil contract calls for delivery of 60,000 pounds. What happens to the seller of a
soybean futures contract at 41 cents per pound if the futures price closes the next day at 42
cents per pound?
52. A futures contract seller is obligated to deliver 5,000 bushels of soybeans for $12.00 per
bushel at expiration. If soybean futures close at $12.10 the next day, the seller:
53. What has happened to cause a $250 loss to be marked to the margin account of a futures
contract buyer?
54. The effect of marking a futures contract to market is similar to:
55. The primary purpose of financial futures is to:
56. The basic difference between speculators and hedgers in futures contracts is that
speculators:
57. If the market for corn futures has more prospective sellers than buyers, then one would
expect:
58. Which one of the following is
not
correct concerning forward contracts? Forward
contracts:
59. You enter into a forward contract to take delivery of 1 million euros 3 months from now.
What happens to the price you will pay at expiration if the euro depreciates during the contract
period?
60. Which one of the following is a major reason for firms to engage in currency swaps?
61. When two borrowers engage in a currency swap, they agree to:
62. In an interest rate swap, borrowers typically exchange fixed-rate payments in one
currency for:
63. ABC Corp. entered into a currency swap with its bank, providing that ABC borrows $5
million at 10% and swaps for a 12% yen loan. The spot exchange rate is ¥105/$. If interest only is
to be repaid on an annual basis, how much does ABC pay annually to the bank?
64. Because most hedging acts to reduce risk, managers should expect that hedging will:
65. Managers are willing to pay a price to hedge because:
66. If managers are rational, they will hedge only when they perceive that:
67. Hershey's Chocolate is concerned about cocoa prices prior to building inventory for
Halloween sales. Analysts project that the price per ton could vary from $2,900 to $3,100. A
September call option can be purchased with a $2,950 strike price for a premium of $145. What is
Hershey's worst-case scenario if it purchases these options?
68. Manufacturers who are concerned about volatile commodity prices often use option
contracts to alter their risks. What is the worst-case scenario for a seller of put options on corn
with a strike price of $4.75 per bushel?
69. Producers who hedge through the purchase of put options must remember that they may
be:
70. One distinguishing difference between the buyer of a futures contract and the buyer of an
option contract is that the futures buyer:
71. In general, when deciding whether a market participant needs to buy or sell futures
contracts in order to hedge, the rule could be:
72. As time draws closer to contract expiration, futures contract prices can be expected to:
73. Why are most futures contracts not settled through delivery of the product?
74. How does a soybean farmer lock in a price of $14.40 per bushel when the cash price at
harvest is only $14?
75. Which one of the following statements is correct for an interest rate swap?
76. A gasoline distributor buys a gasoline futures contract that requires acceptance of 42,000
gallons of gasoline at $2.94 per gallon. How is the account marked to market if gasoline futures
close the next day at $2.97?
77. The seller of a pork bellies futures contract at $1.41 per pound noted that the closing
price of pork bellies was $1.44 today. What will happen to this contract, which requires delivery of
40,000 pounds of pork bellies at expiration?
78. The typical sequence of cash flows in a futures contract is:
79. The seller of a copper futures contract noticed that his account was marked with a $500
gain yesterday. If the standardized contract requires delivery of 25,000 pounds of copper, what
happened that day to the price of copper?
80. Financial futures are available to protect against all of the following
except
:
81. Which one of the following is
false
concerning the financial futures markets?
82. A producer has purchased cotton futures that involve 50,000 pounds of cotton at a price
of $0.80 per pound. By contract expiration the producer finds that cotton prices have declined by
$0.07 per pound. As a result of the futures contracts, the producer will:
83. Which one of the following futures contract holders is speculating?
84. The activities of speculators are necessary in the futures markets in order to:
85. Those who invest in derivative instruments with the purpose of increasing rather than
decreasing risk are known as:
