66.
Which of the following is true about profits from futures contracts?
Which of the following is false about profits from futures contracts?
I) The person with the long position gets to decide whether to exercise the futures
contract and will only do so if there is a profit to be made.
II) It is possible for both the holder of the long position and the holder of the short position
to earn a profit.
III) The clearinghouse makes most of the profit.
IV) The amount that the holder of the long position gains must equal the amount that the
holder of the short position loses.
68.
Some of the newer futures contracts include
I) fashion futures.
II) weather futures.
III) electricity futures.
IV) entertainment futures.
69.
Who guarantees that a futures contract will be fulfilled?
If you took a long position in a pork bellies futures contract and then forgot about it, what
would happen at the expiration of the contract?
71.
If a trader holding a long position in oil futures fails to meet the obligations of a futures
contract, the party that is hurt by the failure is
72.
A trader who has a __________ position in oil futures believes the price of oil will
__________ in the future.
A trader who has a __________ position in gold futures wants the price of gold to
__________ in the future.
You hold one long oil futures contract that expires in April. To close your position in oil
futures before the delivery date you must
75.
Financial futures contracts are actively traded on the following indices except
76.
Financial futures contracts are actively traded on which of the following indices?
To exploit an expected decrease in interest rates, an investor would most likely
An investor with a short position in Treasury notes futures will profit if
79.
To hedge a short position in Treasury bonds, an investor most likely would
80.
A decrease in the basis will __________ a long hedger and __________ a short hedger.
Which one of the following statements regarding “basis” is true?
I) The basis is the difference between the futures price and the spot price.
II) The basis risk is borne by the hedger.
III) A short hedger suffers losses when the basis decreases.
IV) The basis increases when the futures price increases by more than the spot price.
82.
If you determine that the DAX-30 Index futures is overpriced relative to the spot DAX-30
Index you could make an arbitrage profit by
83.
If you determine that the DAX-30 Index futures is underpriced relative to the spot DAX-30
Index you could make an arbitrage profit by
On January 1, the listed spot and futures prices of a Treasury bond were 95.4 and 95.6.
You sold $100,000 par value Treasury bonds and purchased one Treasury bond futures
contract. One month later, the listed spot price and futures prices were 95 and 94.4,
respectively. If you were to liquidate your position, your profits would be
85.
You purchased one oil future contract at $70 per barrel. What would be your profit (loss)
at maturity if the oil spot price at that time is $73.12 per barrel? Assume the contract size
is 1,000 barrels and there are no transactions costs.
86.
You sold one oil future contract at $70 per barrel. What would be your profit (loss) at
maturity if the oil spot price at that time is $73.12 per barrel? Assume the contract size is
1,000 barrels and there are no transactions costs.
Short Answer Questions
Describe the differences between futures and forward contracts.
88.
Distinguish between the short and long positions in futures transactions.
Discuss marking to market and margin accounts in the futures market.
90.
You purchased the following futures contract today at the settlement price listed in the
Wall
Street
Journal.
Answer the questions below regarding the contract.
– What is the total value of the futures contract?
– If there is a 10% margin requirement, how much do you have to deposit?
– Suppose the price of the futures contract changes as shown in the following table.
– Enter the relevant information into the table. Show your calculations.
– Explain why the account is marked to market daily.
91.
Describe the types of traders that are active in the futures markets. Explain why each type
is in the markets and how their goals differ. Give an example of how each might use the
market.