IvanRivera6-Futures and Options Market Project Unit 7

IvanRivera6-Futures and Options Market Project Unit 7 -...

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Futures and Options Market Project Unit 7 Financial Markets MT481 Prof. D. Weaver By Ivan Rivera Chapter 13: Questions and Applications: q. 1, 4, 5, and 14, page 349-350. 1. Futures Contracts Describe the general characteristics of a futures contract. How does a clearinghouse facilitate the trading of financial futures contracts? Answer: Future contract is a standard agreement to receive or deliver a specific amount at a specified amount with said instrument or contract. The Clearing house is kind of like an escrow company; in the way that it records and verifies all transactions before money is paid out, this way no credit risk or credit check up is needed. 4. Treasury Bond Futures Will speculators buy or sell Treasury bond futures contracts if they expect interest rates to increase? Explain. Answer: When speculation of high interest rates are heard of, then the T-bills should be sold specially by Speculators because this would imply low bond pricing. If securities price drop then the connection they have with future contracts means their pricing will also drop 5. Gains from Purchasing Futures Explain how purchasers of financial futures contracts can offset their position. How is their gain or loss determined? What is the maximum loss to a purchaser of a futures contract?
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Answer: Purchaser sell their future contracts that are equal or identical this helps in the offsetting their positions. The gain or loss is always the difference of how much the
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IvanRivera6-Futures and Options Market Project Unit 7 -...

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