證券投資學(xué)英文第7版課后答案：chap022

MultipleChoiceQuestions 1. Afuturescontract A) isanagreementtobuyorsellaspecifiedamountofanassetatthespotpriceontheexpirationdateofthecontract. B) isanagreementtobuyorsellaspecifiedamountofanassetatapredeterminedpriceontheexpirationdateofthecontract. C) givesthebuyertheright,butnottheobligation,tobuyanassetsometimeinthefuture. D) isacontracttobesignedinthefuturebythebuyerandthesellerofthecommodity. E) noneoftheabove.Answer:BDifficulty:Easy Rationale:Afuturescontractlocksinthepriceofacommoditytobedeliveredatsomefuturedate.Boththebuyerandsellerofthecontractarecommitted. 2. Thetermsoffuturescontracts__________standardized,andthetermsofforwardcontracts__________standardized. A) are;are B) arenot;are C) are;arenot D) arenot;arenot E) are;mayormaynotbeAnswer:CDifficulty:Easy Rationale:Futurescontractsarestandardizedandaretradedonorganizedexchanges;forwardcontractsarenottradedonorganizedexchanges,theparticipantnegotiatesforthedeliveryofanyquantityofgoods,andbanksandbrokersnegotiatecontractsasneeded. 3. Futurescontracts__________tradedonanorganizedexchange,andforwardcontracts__________tradedonanorganizedexchange. A) arenot;are B) are;are C) arenot;arenot D) are;arenot E) are;mayormaynotbeAnswer:DDifficulty:Easy Rationale:Seerationalefortestbankquestion22.2.

4. Inafuturescontractthefuturespriceis A) determinedbythebuyerandthesellerwhenthedeliveryofthecommoditytakesplace. B) determinedbythefuturesexchange. C) determinedbythebuyerandthesellerwhentheyinitiatethecontract. D) determinedindependentlybytheprovideroftheunderlyingasset. E) noneoftheabove.Answer:CDifficulty:Moderate Rationale:Thefuturesexchangesspecifyallthetermsofthecontractsexceptprice;asaresult,thetradersbargainoverthefuturesprice. 5. Thebuyerofafuturescontractissaidtohavea__________positionandthesellerofafuturescontractissaidtohavea__________positioninfutures. A) long;short B) long;long C) short;short D) short;long E) margined;longAnswer:ADifficulty:Moderate Rationale:Thetradertakingthelongpositioncommitstopurchasethecommodityonthedeliverydate.Thetradertakingtheshortpositioncommitstodeliveringthecommodityatcontractmaturity.Thetraderinthelongpositionissaidto"buy"thecontract;thetraderintheshortpositionissaidto"sell"thecontract.However,nomoneychangeshandsatthistime. 6. Investorswhotakelongpositionsinfuturesagreeto__________ofthecommodityonthedeliverydate,andthosewhotaketheshortpositionsagreeto__________ofthecommodity. A) makedelivery;takedelivery B) takedelivery;makedelivery C) takedelivery;takedelivery D) makedelivery;takedelivery E) negotiatetheprice;paythepriceAnswer:BDifficulty:Moderate Rationale:Seeexplanationfortestbankquestion22.5.

7. Thetermsoffuturescontractssuchasthequalityandquantityofthecommodityandthedeliverydateare A) specifiedbythebuyersandsellers. B) specifiedonlybythebuyers. C) specifiedbythefuturesexchanges. D) specifiedbybrokersanddealers. E) noneoftheabove.Answer:CDifficulty:Moderate Rationale:Seerationalefortestbankquestion22.4. 8. Atraderwhohasa__________positioninwheatfuturesbelievesthepriceofwheatwill__________inthefuture. A) long;increase B) long;decrease C) short;increase D) long;staythesame E) short;staythesameAnswer:ADifficulty:Moderate Rationale:Thetraderholdingthelongposition(thepersonwhowillpurchasethegoods)willprofitfromapriceincrease.Profittolongposition=Spotpriceatmaturity--Originalfuturesprice. 9. Atraderwhohasa__________positioningoldfutureswantsthepriceofgoldto__________inthefuture. A) long;decrease B) short;decrease C) short;staythesame D) short;increase E) long;staythesameAnswer:BDifficulty:Moderate Rationale:Profittoshortposition=Originalfuturesprice--Spotpriceatmaturity.Thus,thepersonintheshortpositionprofitsifthepriceofthecommoditydeclinesinthefuture.

10. Theopeninterestonsilverfuturesataparticulartimeisthe A) numberofsilverfuturescontractstradedduringtheday. B) numberofoutstandingsilverfuturescontractsfordeliverywithinthenextmonth. C) numberofsilverfuturescontractstradedthepreviousday. D) numberofallsilverfuturesoutstandingcontracts. E) noneoftheabove.Answer:DDifficulty:Moderate Rationale:Openinterestisthenumberofcontractsoutstanding.Whencontractsbegintrading,openinterestiszero;astimepassesmorecontractsareentered.Mostcontractsareliquidatedbeforethematuritydate. 11. Whichoneofthefollowingstatementsregardingdeliveryistrue? A) Mostfuturescontractsresultinactualdelivery. B) Onlyonetothreepercentoffuturescontractsresultinactualdelivery. C) Onlyfifteenpercentoffuturescontractsresultinactualdelivery. D) Approximatelyfiftypercentoffuturescontractsresultinactualdelivery. E) Futurescontractsneverresultinactualdelivery.Answer:BDifficulty:Moderate Rationale:Virtuallyalltradersenterreversingtradestocanceltheiroriginalpositions,therebyrealizingprofitsorlossesonthecontract. 12. YouholdonelongcornfuturescontractthatexpiresinApril.Tocloseyourpositionincornfuturesbeforethedeliverydateyoumust A) buyoneMaycornfuturescontract. B) buytwoAprilcornfuturescontract. C) selloneAprilcornfuturescontract. D) selloneMaycornfuturescontract. E) noneoftheabove.Answer:CDifficulty:Moderate Rationale:Thelongpositionisconsideredthebuyer;tocloseoutthepositiononemusttakeareversingposition,orsellthecontract.

13. Whichoneofthefollowingstatementsistrue? A) Themaintenancemarginistheamountofmoneyyoupostwithyourbrokerwhenyoubuyorsellafuturescontract. B) Themaintenancemargindeterminesthevalueofthemarginaccountbelowwhichtheholderofafuturescontractreceivesamargincall. C) Amargindepositcanonlybemetwithcash. D) Allfuturescontractsrequirethesamemargindeposit. E) Themaintenancemarginissetbytheproduceroftheunderlyingasset.Answer:BDifficulty:Moderate Rationale:Themaintenancemarginappliestothevalueoftheaccountaftertheaccountisopened;ifthevalueofthisaccountfallsbelowthemaintenancemarginrequirementandtheholderofthecontractwillreceiveamargincall.Amargindepositcanbemadewithcashorinterest-earningsecurities;themargindepositamountsdependonthevolatilityoftheunderlyingasset. 14. Financialfuturescontractsareactivelytradedonthefollowingindicesexcept A) theS&P500Index. B) theNewYorkStockExchangeIndex. C) theNikkeiIndex. D) theDowJonesIndustrialIndex. E) alloftheaboveindiceshaveactivelytradedfuturescontracts.Answer:EDifficulty:Moderate Rationale:TheindicesarelistedinTable22.1. 15. Toexploitanexpectedincreaseininterestrates,aninvestorwouldmostlikely A) sellTreasurybondfutures. B) takealongpositioninwheatfutures. C) buyS&P500indexfutures. D) takealongpositioninTreasurybondfutures. E) noneoftheabove.Answer:ADifficulty:Difficult Rationale:Ifinterestratesrise,bondpricesdecrease.Asbondpricesdecrease,theshortpositiongains.Thus,ifyouarebearishaboutbondprices,youmightspeculatebysellingT-bondfuturescontracts.

16. AninvestorwithalongpositioninTreasurynotesfutureswillprofitif A) interestratesdecline. B) interestrateincrease. C) thepricesofTreasurynotesincrease. D) thepriceofthelongbondincreases. E) noneoftheabove.Answer:ADifficulty:Moderate Rationale:Profittolongposition=Spotpriceatmaturity--originalfuturesprice. 17. TohedgealongpositioninTreasurybonds,aninvestormostlikelywould A) buyinterestratefutures. B) sellS&Pfutures. C) sellinterestratefutures. D) buyTreasurybondsinthespotmarket. E) noneoftheabove.Answer:CDifficulty:Difficult Rationale:Bytakingtheshortposition,thehedgerisobligatedtodeliverT-bondsatthecontractmaturitydateforthecurrentfuturesprice,whichlocksinthesalespriceforthebondsandguaranteesthatthetotalvalueofthebond-plus-futurespositionatthematuritydateisthefuturesprice. 18. Anincreaseinthebasiswill__________alonghedgerand__________ashorthedger. A) hurt;benefit B) hurt;hurt C) benefit;hurt D) benefit;benefit E) benefit;havenoeffectuponAnswer:CDifficulty:Difficult Rationale:Ifacontractandanassetaretobeliquidatedearly,basisriskexistsandfuturespriceandspotpriceneednotmoveinlockstepbeforedeliverydate.Anincreaseinthebasiswillhurttheshorthedgerandbenefitthelonghedger.

19. Whichoneofthefollowingstatementsregarding"basis"isnottrue? A) thebasisisthedifferencebetweenthefuturespriceandthespotprice. B) thebasisriskisbornebythehedger. C) ashorthedgersufferslosseswhenthebasisdecreases. D) thebasisincreaseswhenthefuturespriceincreasesbymorethanthespotprice. E) noneoftheabove.Answer:CDifficulty:Difficult Rationale:Seeexplanationfortestbankquestion22.20. 20. IfyoudeterminethattheS&P500IndexfuturesisoverpricedrelativetothespotS&P500Indexyoucouldmakeanarbitrageprofitby A) buyingallthestocksintheS&P500andsellingputoptionsontheS&P500index. B) sellingshortallthestocksintheS&P500andbuyingS&PIndexfutures. C) sellingallthestocksintheS&P500andbuyingcalloptionsontheS&P500index. D) sellingS&P500IndexfuturesandbuyingallthestocksintheS&P500. E) noneoftheabove.Answer:DDifficulty:Moderate Rationale:Ifyouthinkoneassetisoverpricedrelativetoanother,youselltheoverpricedassetandbuytheotherone. 21. OnJanuary1,thelistedspotandfuturespricesofaTreasurybondwere93.8and93.13.Youpurchased$100,000parvalueTreasurybondsandsoldoneTreasurybondfuturescontract.Onemonthlater,thelistedspotpriceandfuturespriceswere94and94.09,respectively.Ifyouweretoliquidateyourposition,yourprofitswouldbe A) $125loss. B) $125profit. C) $12.50loss. D) $1,250loss. E) noneoftheabove.Answer:ADifficulty:Difficult Rationale:Onbonds:$94,000-$93,250=$750;Onfutures:$93,406.25-$94,281.25=-$875;Netprofits:$750-$875=-$125.

22. Youpurchasedonesilverfuturecontractat$3perounce.Whatwouldbeyourprofit(loss)atmaturityifthesilverspotpriceatthattimeis$4.10perounce?Assumethecontractsizeis5,000ouncesandtherearenotransactionscosts. A) $5.50profit B) $5,500profit C) $5.50loss D) $5,500loss E) noneoftheabove.Answer:BDifficulty:Moderate Rationale:$4.10-$3.00=$1.10X5,000=$5,500. 23. Yousoldonesilverfuturecontractat$3perounce.Whatwouldbeyourprofit(loss)atmaturityifthesilverspotpriceatthattimeis$4.10perounce?Assumethecontractsizeis5,000ouncesandtherearenotransactionscosts. A) $5.50profit B) $5,500profit C) $5.50loss D) $5,500loss E) noneoftheabove.Answer:DDifficulty:Moderate Rationale:$3.00-$4.10=-$1.10X5,000=-$5,500. 24. Youpurchasedonecornfuturecontractat$2.29perbushel.Whatwouldbeyourprofit(loss)atmaturityifthecornspotpriceatthattimewere$2.10perbushel?Assumethecontractsizeis5,000ouncesandtherearenotransactionscosts. A) $950profit B) $95profit C) $950loss D) $95loss E) noneoftheabove.Answer:CDifficulty:Moderate Rationale:$2.10-$2.29=-$0.19X5,000=-$950.

25. Yousoldonecornfuturecontractat$2.29perbushel.Whatwouldbeyourprofit(loss)atmaturityifthecornspotpriceatthattimewere$2.10perbushel?Assumethecontractsizeis5,000ouncesandtherearenotransactionscosts. A) $950profit B) $95profit C) $950loss D) $95loss E) noneoftheabove.Answer:ADifficulty:Moderate Rationale:$2.29-$2.10=$0.19X5,000=$950. 26. Yousoldonewheatfuturecontractat$3.04perbushel.Whatwouldbeyourprofit(loss)atmaturityifthewheatspotpriceatthattimewere$2.98perbushel?Assumethecontractsizeis5,000ouncesandtherearenotransactionscosts. A) $30profit B) $300profit C) $300loss D) $30loss E) noneoftheabove.Answer:BDifficulty:Moderate Rationale:$3.04-$2.98=$0.06X5,000=$300. 27. Youpurchasedonewheatfuturecontractat$3.04perbushel.Whatwouldbeyourprofit(loss)atmaturityifthewheatspotpriceatthattimewere$2.98perbushel?Assumethecontractsizeis5,000ouncesandtherearenotransactionscosts. A) $30profit B) $300profit C) $300loss D) $30loss E) noneoftheabove.Answer:CDifficulty:Moderate Rationale:$2.98-$3.04=-$0.06X5,000=-$300.

28. OnJanuary1,yousoldoneAprilS&P500indexfuturescontractatafuturespriceof420.IfonFebruary1theAprilfuturespricewere430,whatwouldbeyourprofit(loss)ifyouclosedyourposition(withoutconsideringtransactionscosts)? A) $2,500loss B) $10loss C) $2,500profit D) $10profit E) noneoftheaboveAnswer:ADifficulty:Difficult Rationale:$420-$430=-$10X250=-$2,500 29. OnJanuary1,youboughtoneAprilS&P500indexfuturescontractatafuturespriceof420.IfonFebruary1theAprilfuturespricewere430,whatwouldbeyourprofit(loss)ifyouclosedyourposition(withoutconsideringtransactionscosts)? A) $2,500loss B) $10loss C) $2,500profit D) $10profit E) noneoftheaboveAnswer:CDifficulty:Difficult Rationale:$430-$420=$10X250=$2,500 30. Yousoldonesoybeanfuturecontractat$5.13perbushel.Whatwouldbeyourprofit(loss)atmaturityifthewheatspotpriceatthattimewere$5.26perbushel?Assumethecontractsizeis5,000ouncesandtherearenotransactionscosts. A) $65profit B) $650profit C) $650loss D) $65loss E) noneoftheabove.Answer:CDifficulty:Moderate Rationale:$5.13-$5.26=-$0.13X5,000=-$650.

31. Youboughtonesoybeanfuturecontractat$5.13perbushel.Whatwouldbeyourprofit(loss)atmaturityifthewheatspotpriceatthattimewere$5.26perbushel?Assumethecontractsizeis5,000ouncesandtherearenotransactionscosts. A) $65profit B) $650profit C) $650loss D) $65loss E) noneoftheabove.Answer:BDifficulty:Moderate Rationale:$5.26-$5.13=$0.13X5,000=$650. 32. OnApril1,youboughtoneS&P500indexfuturescontractatafuturespriceof950.IfonJune15ththefuturespricewere1012,whatwouldbeyourprofit(loss)ifyouclosedyourposition(withoutconsideringtransactionscosts)? A) $1,550loss B) $15,550loss C) $15,550profit D) $1,550profit E) noneoftheaboveAnswer:CDifficulty:Difficult Rationale:$1012-$950=$62X250=$15,500 33. OnApril1,yousoldoneS&P500indexfuturescontractatafuturespriceof950.IfonJune15ththefuturespricewere1012,whatwouldbeyourprofit(loss)ifyouclosedyourposition(withoutconsideringtransactionscosts)? A) $1,550loss B) $15,550loss C) $15,550profit D) $1,550profit E) noneoftheaboveAnswer:BDifficulty:Difficult Rationale:$950-$1012=-$62X250=-$15,500

34. Theexpectationshypothesisoffuturespricing A) isthesimplesttheoryoffuturespricing. B) statesthatthefuturespriceequalstheexpectedvalueofthefuturespotpriceoftheasset. C) isnotazerosumgame. D) AandB. E) AandC.Answer:DDifficulty:Easy Rationale:Theexpectationshypothesisreliesontheconceptofriskneutrality;i.e.,ifallmarketparticipantsareriskneutral,theyshouldagreeonafuturespricethatprovidesanexpectedprofitofzerotoallparties. 35. Normalbackwardation A) maintainsthatformostcommodities,therearenaturalhedgerswhodesiretoshedrisk. B) maintainsthatspeculatorswillenterthelongsideofthecontractonlyifthefuturespriceisbelowtheexpectedspotprice. C) assumesthatriskpremiumsinthefuturesmarketsarebasedonsystematicrisk. D) AandB. E) BandC.Answer:DDifficulty:Easy Rationale:Riskpremiumsinthistheoryarebasedontotalvariability. 36. Contango A) holdsthatthenaturalhedgersarethepurchasersofacommodity,notthesuppliers. B) isahypothesispolartobackwardation. C) holdsthatFOmustbelessthan(PT). D) AandC. E) AandB.Answer:EDifficulty:Easy

37. Deliveryofstockindexfutures A) isnevermade. B) ismadebyacashsettlementbasedontheindexvalue. C) requiresdeliveryof1shareofeachstockintheindex. D) ismadebydelivering100sharesofeachstockintheindex. E) ismadebydeliveringavalue-weightedbasketofstocks.Answer:BDifficulty:Moderate Rationale:Stockindexfuturesarecash-settled,similartotheprocedureusedforindexoptions. 38. Theestablishmentofafuturesmarketinacommodityshouldnothaveamajorimpactonspotpricesbecause A) thefuturesmarketissmallrelativetothespotmarket. B) thefuturesmarketisilliquid. C) futuresareazero-sumgame D) thefuturesmarketislargerelativetothespotmarket. E) mostfuturescontractsdonottakedelivery.Answer:CDifficulty:Moderate Rationale:Lossesandgainstofuturescontractsnettozero,andthusshouldnotimpactspotprices. 39. Themostrecentlyestablishedcategoryoffuturescontractsis A) agriculturalcommodities. B) metalsandminerals. C) foreigncurrencies. D) financialfutures. E) bothBandC.Answer:DDifficulty:Moderate Rationale:Financialfutureswerefirstintroducedin1975,andthissegmentofthemarkethasseenrapidinnovation.

40. Ifatraderholdingalongpositionincornfuturesfailstomeettheobligationsofafuturescontract,thepartythatishurtbythefailureis A) theoffsettingshorttrader. B) thecornfarmer. C) theclearinghouse. D) thebroker. E) thecommoditiesdealer.Answer:CDifficulty:Moderate Rationale:Theclearinghouseactsasamiddlepartytoeverytransaction,andbearsanylossesarisingfromfailuretomeetcontractualobligations. 41. Openinterestincludes A) onlycontractswithaspecifieddeliverydate. B) thesumofshortandlongpositions. C) thesumofshort,longandclearinghousepositions. D) thesumoflongorshortpositionsandclearinghousepositions. E) onlylongorshortpositionsbutnotboth.Answer:EDifficulty:Moderate Rationale:Openinterestisthenumberofcontractsoutstandingacrossalldeliverydatesforagivencontract.Longandshortpositionsarenotcountedseparately,andtheclearinghousepositionisnotcountedbecauseitnetstozero. 42. Theprocessofmarking-to-market A) postsgainsorlossestoeachaccountdaily. B) mayresultinmargincalls. C) impactsonlylongpositions. D) alloftheabovearetrue. E) bothAandBaretrue.Answer:EDifficulty:Easy Rationale:Marking-to-marketeffectivelyputsfuturescontractsona"payasyougo"basis.

43. Futurescontractsareregulatedby A) theCommodityFuturesTradingCorporation. B) theChicagoBoardofTrade. C) theChicagoMercantileExchange. D) theFederalReserve. E) theSecuritiesandExchangeCommission.Answer:ADifficulty:Easy Rationale:TheCFTC,afederalagency,setsrulesandrequirementsforfuturestrading. 44. Taxationoffuturestradinggainsandlosses A) isbasedoncumulativeyear-endprofitsorlosses. B) occursbasedonthedatecontractsaresoldorclosed. C) canbetimedtooffsetstockportfoliogainsandlosses. D) isbasedonthecontractholdingperiod. E) noneoftheabove.Answer:ADifficulty:Moderate Rationale:Futuresprofitsandlossesaretaxedbasedoncumulativeyear-endvalueduetomarking-to-marketprocedures. 45. Speculatorsmayusefuturesmarketsratherthanspotmarketsbecause A) transactionscostsarelowerinfuturesmarkets. B) futuresmarketsprovideleverage. C) spotmarketsarelessefficient. D) futuresmarketsarelessefficient. E) bothAandBaretrue.Answer:EDifficulty:Moderate Rationale:Futuresmarketsallowspeculatorstobenefitfromleverageandminimizetransactionscosts.Bothmarketsshouldbeequallyprice-efficient. 46. Givenastockindexwithavalueof$1,000,ananticipateddividendof$30andarisk-freerateof6%,whatshouldbethevalueofonefuturescontractontheindex? A) $943.40 B) $970.00 C) $913.40 D) $915.09 E) $1000.00Answer:CDifficulty:Difficult Rationale:F=1000/(1.06)-30;F=913.40.

47. Givenastockindexwithavalueof$1,125,ananticipateddividendof$33andarisk-freerateof4%,whatshouldbethevalueofonefuturescontractontheindex? A) $1048.73 B) $1070.00 C) $993.40 D) $995.09 E) $1000.00Answer:ADifficulty:Difficult Rationale:F=1125/(1.04)-33;F=1048.73. 48. Givenastockindexwithavalueof$1100,ananticipateddividendof$27andarisk-freerateof3%,whatshouldbethevalueofonefuturescontractontheindex? A) $943.40 B) $970.00 C) $913.40 D) $1040.96 E) $1000.00Answer:DDifficulty:Difficult Rationale:F=1100/(1.03)-27;F=1040.96. 49. Givenastockindexwithavalueof$1,200,ananticipateddividendof$45andarisk-freerateof6%,whatshouldbethevalueofonefuturescontractontheindex? A) $1087.08 B) $1070.00 C) $993.40 D) $995.09 E) $1000.00Answer:ADifficulty:Difficult Rationale:F=1200/(1.06)-45;F=1087.08.

50. Whichofthefollowingitemsisspecifiedinafuturescontract? thecontractsizethemaximumacceptablepricerangeduringthelifeofthecontracttheacceptablegradeofthecommodityonwhichthecontractisheldthemarketpriceatexpirationthesettlementprice A) I,II,andIV B) I,III,andV C) IandV D) I,IV,andV E) I,II,III,IV,andVAnswer:BDifficulty:Moderate Rationale:Themaximumpricerangeandthemarketpriceatexpirationwillbedeterminedbythemarketratherthanspecifiedinthecontract. 51. Withregardtofuturescontracts,whatdoestheword“margin”mean? A) Itistheamountofthemoneyborrowedfromthebrokerwhenyoubuythecontract. B) Itisthemaximumpercentagethatthepriceofthecontractcanchangebeforeitismarkedtomarket. C) Itisthemaximumpercentagethatthepriceoftheunderlyingassetcanchangebeforeitismarkedtomarket. D) Itisagood-faithdepositmadeatthetimeofthecontract'spurchaseorsale. E) Itistheamountbywhichthecontractismarkedtomarket.Answer:DDifficulty:Easy Rationale:Theexchangeguaranteestheperformanceofeachparty,soitrequiresagood-faithdeposit.Thishelpsavoidthecostofcreditchecks.

52. Whichofthefollowingistrueaboutprofitsfromfuturescontracts? A) Thepersonwiththelongpositiongetstodecidewhethertoexercisethefuturescontractandwillonlydosoifthereisaprofittobemade. B) Itispossibleforboththeholderofthelongpositionandtheholderoftheshortpositiontoearnaprofit. C) Theclearinghousemakesmostoftheprofit. D) Theamountthattheholderofthelongpositiongainsmustequaltheamountthattheholderoftheshortpositionloses. E) Holdersofshortpositionscanrecognizeprofitsbymakingdeliveryearly.Answer:DDifficulty:Moderate Rationale:Thenetprofitonthecontractiszeroitisazero-sumgame. 53. Someofthenewerfuturescontractsinclude fashionfutures.weatherfutures.electricityfutures.entertainmentfutures. A) IandII B) IIandIII C) IIIandIV D) I,II,andIII E) I,III,andIVAnswer:BDifficulty:Easy Rationale:Weatherandelectricityfuturesarementionedinthetextbookasrecentinnovations. 54. Whoguaranteesthatafuturescontractwillbefulfilled? A) thebuyer B) theseller C) thebroker D) theclearinghouse E) nobodyAnswer:DDifficulty:Easy Rationale:Oncetwopartieshaveagreedtoenterthetransaction,theclearinghousebecomesthebuyerandsellerofthecontractandguaranteesitscompletion.

55. Ifyoutookalongpositioninaporkbelliesfuturescontractandthenforgotaboutit,whatwouldhappenattheexpirationofthecontract? A) Nothing--thesellerunderstandsthatthesethingshappen. B) Youwouldwakeuptofindtheporkbelliesonyourfrontlawn. C) Yourbrokerwouldsendyouanastyletter. D) Youwouldbenotifiedthatyouowetheholderoftheshortpositionacertainamountofcash. E) Youwouldbenotifiedthatyouhavetopayapenaltyinadditiontotheregularcostoftheporkbellies.Answer:DDifficulty:Easy Rationale:Theitemisusuallynotdelivered,butcashsettlementcanbemadethroughtheuseofwarehousereceipts.Youarestillobligatedtofulfillthecontractandgivetheholderoftheshortpositionthevalueoftheporkbellies. 56. Hedgingapositionusingfuturesonanothercommodityiscalled A) surrogatehedging. B) crosshedging. C) alternativehedging. D) correlativehedging. E) proxyhedging.Answer:BDifficulty:Easy Rationale:Cross-hedgingisusedinsomecasesbecausenofuturescontractexistsfortheitemyouwanttohedge.Thetwocommoditiesshouldbehighlycorrelated. 57. Atraderwhohasa__________positioninoilfuturesbelievesthepriceofoilwill__________inthefuture. A) short;increase B) long;increase C) short;decrease D) long;staythesame E) BandCAnswer:EDifficulty:Moderate Rationale:Thetraderholdingthelongposition(thepersonwhowillpurchasethegoods)willprofitfromapriceincrease.Profittolongposition=Spotpriceatmaturity--Originalfuturesprice.

58. Atraderwhohasa__________positioningoldfutureswantsthepriceofgoldto__________inthefuture. A) long;decrease B) short;decrease C) short;staythesame D) short;increase E) long;staythesameAnswer:BDifficulty:Moderate Rationale:Profittoshortposition=Originalfuturesprice-Spotpriceatmaturity.