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Exam 17: Futures Markets and Risk Management

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Question 31

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The current level of the S&P 500 is 1250.The dividend yield on the S&P 500 is 3%.The risk-free interest rate is 6%.The futures price quote for a contract on the S&P 500 due to expire 6 months from now should be __________.

A) 1274.33
B) 1286.95
C) 1268.61
D) 1291.29

E) All of the above
F) C) and D)

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Question 32

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On Monday morning you sell one June T-bond futures contract at 97:27 or for $97,843.75. The contract's face value is $100,000. The initial margin requirement is $2,700 and the maintenance margin requirement is $2,000 per contract. Use the following price data to answer questions 67 through 70. -Your cumulative rate of return on your investment after Wednesday is a/an ____.

A) 79.9% loss
B) 2.6% loss
C) 33.0% gain
D) 53.9% loss

E) B) and D)
F) B) and C)

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Question 33

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At maturity of a future contract,the spot price and futures price must be approximately the same because of __________.

Interest rate futures contracts exist for all of the following except __________.

A farmer sells futures contracts at a price of $2.75 per bushel. The spot price of corn is $2.55 at contract expiration. The farmer harvested 12,500 bushels of corn and sold futures contracts on 10,000 bushels of corn. -What are the farmer's proceeds from the sale of corn?

From the perspective of determining profit and loss,the long futures position most closely resembles a levered investment in a ____________.

The _________ contract dominates trading in stock index futures.

The daily settlement of obligations on futures positions is called _____________.

The Student Loan Marketing Association (SLMA) has short term student loans funded by long term debt.To hedge out this interest rate risk SLMA could ______________. I.engage in a swap to pay fixed and receive variable interest payments II.engage in a swap to pay variable and receive fixed interest payments III.buy T-bond futures IV.sell T-bond futures

Which one of the following contracts requires no cash to change hands when initiated?

A farmer sells futures contracts at a price of $2.75 per bushel. The spot price of corn is $2.55 at contract expiration. The farmer harvested 12,500 bushels of corn and sold futures contracts on 10,000 bushels of corn. -Ignoring the transaction costs,how much did the farmer improve his cash flow by hedging sales with the futures contracts?

Futures contracts are said to exhibit the property of convergence because _______________.

The clearing corporation has a net position equal to ______.

Which of the following provides the profit to a short position at contract maturity?

A wheat farmer should __________ in order to reduce his exposure to risk associated with fluctuations in wheat prices.

When dividend paying assets are involved,the spot-futures parity relationship can be stated as _________________.

In the futures market the short position's loss is ___________ the long position's gain.

The world's largest futures and options exchange is the _______.

A corporation will be issuing bonds in 6 months and the Treasurer is concerned about unfavorable interest rate moves in the interim.The best way for her to hedge the risk is to _________________.

Synthetic stock positions are commonly used by ______ because of their ______.