Foreign currency futures contracts are actively

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23. Foreign currency futures contracts are actively traded on the A. Japanese yen. B. Australian dollar. C. Brazilian real. D. A and B. E. all of the above. The indices are listed in Table 22.1. Difficulty: Moderate 24. Metals and energy currency futures contracts are actively traded on The indices are listed in Table 22.1. Difficulty: Moderate 22-12
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Chapter 22 - Futures Markets 25. Metals and energy currency futures contracts are actively traded on The indices are listed in Table 22.1. Difficulty: Moderate 26. Interest rate futures contracts are actively traded on the The indices are listed in Table 22.1. Difficulty: Moderate 27. To exploit an expected increase in interest rates, an investor would most likely A. sell Treasury bond futures. B. take a long position in wheat futures. C. buy S&P 500 index futures. D. take a long position in Treasury bond futures. E. none of the above. If interest rates rise, bond prices decrease. As bond prices decrease, the short position gains. Thus, if you are bearish about bond prices, you might speculate by selling T-bond futures contracts. Difficulty: Difficult 22-13
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Chapter 22 - Futures Markets 28. An investor with a long position in Treasury notes futures will profit if Profit to long position = Spot price at maturity - original futures price. Difficulty: Moderate 29. To hedge a long position in Treasury bonds, an investor most likely would By taking the short position, the hedger is obligated to deliver T-bonds at the contract maturity date for the current futures price, which locks in the sales price for the bonds and guarantees that the total value of the bond-plus-futures position at the maturity date is the futures price. Difficulty: Difficult 22-14
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Chapter 22 - Futures Markets 30. An increase in the basis will __________ a long hedger and __________ a short hedger. If a contract and an asset are to be liquidated early, basis risk exists and futures price and spot price need not move in lockstep before delivery date. An increase in the basis will hurt the short hedger and benefit the long hedger. Difficulty: Difficult 22-15
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Chapter 22 - Futures Markets
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