E minis typically have a value of percent of the

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50. E-Minis typically have a value of ____________ percent of the standard contract and exist for ____________. A. 50; individual stocks and commodities B. 50; stock indexes and foreign currencies C. 40; stock indexes and commodities D. 20; individual stocks and commodities E. 20; stock indexes and foreign currencies E-Minis typically have a value of 20 percent of the standard contract and exist for stock indexes and foreign currencies. Difficulty: Easy 51. The most common short term interest rate used in the swap market is None of the above are common short term interest rates used in the swap market. Difficulty: Easy 52. If interest rate parity holds If interest rate parity holds covered interest arbitrage opportunities will not exist Difficulty: Moderate 23-25
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Chapter 23 - Futures, Swaps, and Risk Management 53. If interest rate parity does not hold If interest rate parity holds covered interest arbitrage opportunities will not exist Difficulty: Moderate 54. If covered interest arbitrage opportunities do not exist A. interest rate parity does not hold B. interest rate parity holds C. arbitragers will be able to make risk-free profits D. A and C E. B and C If interest rate parity holds covered interest arbitrage opportunities will not exist Difficulty: Moderate 55. If covered interest arbitrage opportunities exist If interest rate parity holds covered interest arbitrage opportunities will not exist Difficulty: Moderate 23-26
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Chapter 23 - Futures, Swaps, and Risk Management Short Answer Questions 56. Why are commodity futures prices different from other futures prices? Explain the difference and give an example of a commodity and the factors involved. The price of a futures contract for a commodity that must be stored is given by F 0 = P 0 * (1 + r f + c), where P 0 is the spot price of the commodity, r f is the risk-free rate that applies to the opportunity cost of holding the commodity, and c is the carrying cost. Commodity futures have an extra cost integrated into their price - carrying costs can be significant. Carrying costs can include interest costs, storage costs, insurance costs, and an allowance for spoilage of goods in storage. These costs should be considered on a net basis: costs minus the benefits of carrying the commodity, such as protection against running out of stock.
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