Chapter_20_-_Study_Guide - Chapter 20 FUTURES Multiple...

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Chapter Twenty Futures 257 Chapter 20 FUTURES Multiple Choice Questions Understanding Futures Markets 1. Spot markets are: a. for a limited number of commodities. b. for immediate delivery c. for future delivery. d. markets designed to attract speculators. (b) 2. A forward contract differs from a futures contract in that: a. a forward contract is for a shorter period of time. b. a forward contract does not specify the selling price. c. a forward contract does specify the selling price. d. a forward contract is non-binding. (c) 3. Futures contracts are regulated by the: a. Securities Exchange Commission. b. National Association of Security Dealers. c. National Association of Commodity Dealers. d. Commodity Futures Trading Commission. (d) 4. A futures contract is a. a nonnegotiable, nonmarketable instrument. b. a security, like stocks and bonds. c. a standardized transferable agreement providing for the deferred delivery of a specified traded quantity of a commodity. d. not a legal contract, and therefore its terms can be changed . (c)
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Chapter Twenty Futures 258 5. Futures contracts were first traded on a. stock indexes. b. foreign currencies. c. commodities. d. government bonds. (c) 6. Which of the following variables is not established on a futures contract? a. contract size b. price c. delivery date d. specified grade (b) The Structure of Futures Markets 7. Futures trade on the: a. NYSE b. over-the-counter market. c. futures exchanges. e. options exchanges. (c) 8. Futures exchange members: a. trade strictly for their own accounts. b. trade strictly for others. c. can trade for their own accounts or for others. d. are all controlled by commodity firms. (c) 9. On the other side of every futures transaction is: a. the dealer. b. the futures exchange. c. the commodity producer. d. the clearinghouse. (d)
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Chapter Twenty Futures 259 10. An appealing feature of options on futures contracts is that: a. they have longer terms until expiration. b. the purchaser has limited liability. c. losses virtually never occur. d. margin calls occur less frequently. (b, p. 2) The Mechanics of Trading 11. In the case of a futures contract, buyers can settle their positions a. only by taking delivery. b. only by arranging an offsetting contract. c. either by delivery or offset. d. by a combination of delivery and offset. (c) 12. The typical method of settling a futures contract is by: a. arbitrage. b. delivery c. offset. d. hedging. (c) 13. When trading futures, margin a. is seldom used. b. indicates that credit is being extended. c. is a down payment. d. in effect, is a performance bond. (d)
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Chapter Twenty Futures 260 14. Which of the following is a characteristic of futures contracts? They a. are marked to the market daily. b.
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Chapter_20_-_Study_Guide - Chapter 20 FUTURES Multiple...

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