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tb13 - Chapter 13 Financial Derivatives T Multiple Choice 1...

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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?
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Chapter 13 Financial Derivatives 443 5) By hedging a portfolio, a bank manager 6) Which of the following is a reason to hedge a portfolio? 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 9) A contract that requires the investor to buy securities on a future date is called a
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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 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
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