tb13 - Chapter 13 Financial Derivatives T Multiple Choice...

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Chapter 13 Financial Derivatives T Multiple Choice 1) The payoffs for financial derivatives are linked to (a) securities that will be issued in the future. (b) the volatility of interest rates. (c) previously issued securities. (d) government regulations specifying allowable rates of return. (e) none of the above. Answer: C Question Status: New 2) Financial derivatives include (a) stocks. (b) bonds. (c) futures. (d) none of the above. Answer: C Question Status: Previous Edition 3) Financial derivatives include (a) stocks. (b) bonds. (c) forward contracts. (d) both (a) and (b) are true. Answer: C Question Status: Previous Edition 4) Which of the following is not a financial derivative? (a) Stock (b) Futures (c) Options (d) Forward contracts Answer: A Question Status: Previous Edition
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Chapter 13 Financial Derivatives 443 5) By hedging a portfolio, a bank manager (a) reduces interest rate risk. (b) increases reinvestment risk. (c) increases exchange rate risk. (d) increases the probability of gains. Answer: A Question Status: Previous Edition 6) Which of the following is a reason to hedge a portfolio? (a) To increase the probability of gains. (b) To limit exposure to risk. (c) To profit from capital gains when interest rates fall. (d) All of the above. (e) Both (a) and (c) of the above. Answer: B Question Status: Revised 7) Hedging risk for a long position is accomplished by (a) taking another long position. (b) taking a short position. (c) taking additional long and short positions in equal amounts. (d) taking a neutral position. (e) none of the above. Answer: B Question Status: New 8) Hedging risk for a short position is accomplished by (a) taking a long position. (b) taking another short position. (c) taking additional long and short positions in equal amounts. (d) taking a neutral position. (e) none of the above. Answer: A Question Status: New 9) A contract that requires the investor to buy securities on a future date is called a (a) short contract. (b) long contract. (c) hedge. (d) cross. Answer: B Question Status: Previous Edition
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444 Frederic S. Mishkin • Economics of Money, Banking, and Financial Markets, Seventh Edition 10) A long contract requires that the investor (a) sell securities in the future. (b) buy securities in the future. (c) hedge in the future. (d) close out his position in the future. Answer: B Question Status: Previous Edition 11) A person who agrees to buy an asset at a future date has gone (a) long. (b) short. (c) back. (d) ahead. (e) even. Answer: A Question Status: Study Guide 12) A short contract requires that the investor (a) sell securities in the future. (b) buy securities in the future. (c) hedge in the future. (d) close out his position in the future. Answer: A
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This note was uploaded on 10/17/2011 for the course ECON 317 taught by Professor Guidry during the Spring '11 term at Nicholls State.

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tb13 - Chapter 13 Financial Derivatives T Multiple Choice...

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