Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch02

Hull_OFOD9e_MultipleChoice_Questions_and_Answers_Ch02 -...

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Hull: Options, Futures, and Other Derivatives, Ninth Edition Chapter 2: Mechanics of Futures Markets Multiple Choice Test Bank: Question with Answers 1. Which of the following is true A. Both forward and futures contracts are traded on exchanges. B. Forward contracts are traded on exchanges, but futures contracts are not. C. Futures contracts are traded on exchanges, but forward contracts are not. D. Neither futures contracts nor forward contracts are traded on exchanges. Answer: C Futures contracts trade only on exchanges. Forward contracts trade only in the over-the-counter market. 2. Which of the following is NOT true Forward contracts often last longer than futures contracts. B, C, and D are true 3. In the corn futures contract a number of different types of corn can be delivered (with price adjustments specified by the exchange) and there are a number of different delivery locations. Which of the following is true The party with the short position chooses between the alternatives. The alternatives therefore make the futures contract more attractive to the party with the short position. The lower the futures price the less attractive it is to the party with the short position. The benefit of the alternatives available to the party with the short position is therefore compensated for by the futures price being lower than it would otherwise be.
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