Ch7 - 1 Which of the following trading strategies are...

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1) 
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Which of  the  following  trading  strategies  are  correct? I. If you expect the British pound to appreciate in value, you should short the pound. II. If you expect interest rates to rise, you should go long on interest rate futures. III. If you expect the stock market to rise, you should go long on stock - index futures. IV. If you expect the stocks in your portfolio to temporarily decline in value, you should short  stock - index futures.  A) 
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I and II only  B) 
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II and IV only  C) 
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III and IV only  D) 
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I and III only    2) 
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Assume  an  investor thinks the stock market is about to undergo a sharp retreat. Under these conditions, the investor's  best course of action would be to  A) 
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buy stock - index  futures contracts.  B) 
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short sell  stock - index futures contracts.  C) 
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use single stock  futures to sit out the market.  D) 
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use a long  hedge against the investor's existing positions. 
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3) 
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Mr.  Lecourt  sells short 200,000 euros for $240,000.  The exchange rate moves from $1.20 per euro to $1.25.  If Mr.  Lecourt covers his short at this point, he    A) 
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loses $10,000.  B) 
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gains $10,000.  C) 
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loses $12,000.  D) 
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gains $12,000.               4) 
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To hedge  a bond portfolio, an investor should use  A) 
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a foreign - currency future.  B) 
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a stock - index  future.  C) 
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