y

Question 1
4 out of 4 points

Trading restrictions imposed on specific stocks or stock indices are referred to as Answer Selected Answer: circuit breakers. Correct Answer: circuit breakers.
y

Question 2
4 out of 4 points

The basis is the Answer Selected Answer: Correct Answer: difference between the price of a security and the price of a futures contract on the security. difference between the price of a security and the price of a futures contract on the security.
y

Question 3
4 out of 4 points

When securities firms capitalize on discrepancies between prices of index futures and stocks, they are acting as so-called Answer Selected Answer: arbitrageurs. Correct Answer: arbitrageurs.
y

Question 4
4 out of 4 points

A(n) ____ is a standardized agreement to deliver or receive a specified amount of a specified financial instrument at a specified price and date. Answer Selected Answer: financial futures contract

Correct Answer: financial futures contract

y

Question 5
4 out of 4 points

According to the text, when a financial institution sells futures contracts on securities in order to hedge against a change in interest rates, this is referred to as Answer Selected Answer: a short hedge. Correct Answer: a short hedge.
y

Question 6
4 out of 4 points

Interest rate futures are not available on Answer Selected Answer: the S&P 500 index. Correct Answer: the S&P 500 index.
y

Question 7
4 out of 4 points

Assume that a bank obtains most of its funds from large CDs with a one-year maturity. Its assets are in the form of loans with rates that adjust every six months. The bank would be ____ affected if interest rates increase. To partially hedge its position, it could ____ futures contracts. Answer Selected Answer: favorably; purchase Correct Answer: favorably; purchase
y

Question 8
4 out of 4 points

Currency futures may be purchased to hedge ____ or to capitalize on the expected ____ of that currency against the dollar.

Answer Selected Answer: payables; appreciation Correct Answer: payables; appreciation

y

Question 9
4 out of 4 points

The buying or selling of stock index futures with a simultaneous opposite position in the stocks comprising that index is known as Answer Selected Answer: index arbitrage. Correct Answer: index arbitrage.
y

Question 10
4 out of 4 points

Assume that speculators had purchased a futures contract at the beginning of the year. If the price of a security represented by a futures contract ____ over the year, then these speculators would likely have purchased the futures contract for ____ than they can sell it for. Answer Selected Answer: increased; less Correct Answer: increased; less
y

Question 11
0 out of 4 points

When stock portfolio managers use dynamic asset allocation by writing call options on a stock index, they ____ their exposure to stock market conditions. Answer Selected Answer: increase Correct Answer: reduce

Question 12
4 out of 4 points

The ____ is the most important exchange for trading options. Answer Selected Answer: Chicago Board of Options Exchange (CBOE) Correct Answer: Chicago Board of Options Exchange (CBOE)
y

Question 13
4 out of 4 points

The sale of a call option on a stock the seller already owns is referred to as Answer Selected Answer: a covered call. Correct Answer: a covered call.
y

Question 14
4 out of 4 points

A call option is "in the money" when the Answer Selected Answer: market price of the underlying security exceeds the exercise price. Correct Answer: market price of the underlying security exceeds the exercise price.
y

Question 15
4 out of 4 points

When stock portfolio managers use dynamic asset allocation by purchasing call options on a stock index, they ____ their exposure to stock market conditions. Answer Selected Answer: increase Correct Answer: increase

Question 16
4 out of 4 points

Options on stock indexes representing non-U.S. stocks are ____; options exchanges have been established ____. Answer Selected Answer: available; in numerous non-U.S. countries Correct Answer: available; in numerous non-U.S. countries
y

Question 17
0 out of 4 points

Which of the following is not an assumption underlying the Black-Scholes optionpricing model? Answer Selected Answer: The variability of a stock's return is constant. Correct Answer: The world is risk-neutral.
y

Question 18
4 out of 4 points

____ of options can close out their positions at any time by ____ an identical option. Answer Selected Answer: Sellers; purchasing Correct Answer: Sellers; purchasing
y

Question 19
4 out of 4 points

A savings and loan association has long-term fixed rate mortgages supported by shortterm funds. A put option on Treasury bond futures could be used to (ignore the premium paid for the option when you answer this question) Answer Selected Answer: maintain its interest rate spread if interest rates rise, and increase its spread if interest rates fall.

Correct Answer:

maintain its interest rate spread if interest rates rise, and increase its spread if interest rates fall.
y

Question 20
4 out of 4 points

Option trading is regulated by the Answer Selected Answer: Securities and Exchange Commission. Correct Answer: Securities and Exchange Commission.
Thursday, February 16, 2012 9:22:00 PM EST