Mid1Practice

Mid1Practice - 1. Considering interest-rate swaps, the swap...

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1. Considering interest-rate swaps, the swap rate is: A. The benchmark rate plus a premium. B. The rate being offered on U.S. Treasury securities of similar maturities. C. Another name for the swap spread. D. A measure of overall risk in the economy. A 2. The time value of the option can best be defined as: A. The commission earned by a broker. B. The fee earned for the potential benefits from buying the option. C. The service fee charged by the SEC for regulating the option market. D. The fee paid for the potential benefits from buying an option. D 3. The short position in a futures contract is the party that will: A. Deliver a commodity or financial instrument to the buyer at a future date. B. Suffer the loss. C. Accept the risk. D. Benefit from increases in price of the underlying asset. A 4. There is a futures contract for the purchase of 1000 bushels of corn at $3.00 per bushel. If the market price of corn falls to $2.50: A. The buyer (long position) needs to transfer $500 to the seller (short position). B. The seller (long position) needs to transfer $500 to the buyer (short position). C. Nothing happens since marked to market adjustments only occur if the market price rises above the contract price. D. Nothing happened since no funds are transferred until the settlement date. A 5. Speculators differ from hedgers in the sense that: A. Speculators do not like risk. B. Hedgers seek to transfer risk. C. Speculators seek to transfer risk. D. Speculators are hedgers, there isn't any difference. B 6. As the time of settlement gets closer: A. The price of the futures contract will diverge from the price of the underlying asset. B. The price of the futures contract will always be above the price of the underlying asset. C. The price of the underlying asset and the future's price will show no correlation at all. D. The price of the futures contract will move in lockstep with the price of the underlying asset. D
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7. The option writer is: A. The seller of an option. B. The buyer of an option. C. The underlying asset of the option. D. The individual who obtains the rights. A 8. With a call option, the option holder: A. Has the right to sell the asset. B. Has the right to buy the asset. C. Can buy or sell, it is their option. D. Can buy the asset but only on the date specified. B 9. A call option described as at the money would find: A. The market price of the stock is above the strike price. B. The market price of the stock is below the strike price. C. The option has been exercised. D. The market price of the stock equals the strike price. D 10. Which of the following stock price indexes is a price-weighted index? A. Dow Jones Industrial Average B. Standard & Poor's 500 Index C. Nasdaq D. Wilshire 5000 A 11. Which of the following statements is not true?
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This note was uploaded on 03/15/2012 for the course ECON-E 305 taught by Professor La during the Spring '12 term at IUPUI.

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Mid1Practice - 1. Considering interest-rate swaps, the swap...

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