THROUGH 114 RELATE TO DERIVATIVES. (10.5 MINUTES)WHICH O...
Questions 108 through 114 relate to Derivatives. (10.5 minutes)
Which of the following is most likely to increase the price of a forward contract on an asset?
A)
Higher dividends from a stock.
Lower storage costs for a commodity.
B)
C)
Lower convenience yield for a commodity.
Question #109 of 120
Question ID: 1146461
Which of the following statements about call options is least accurate?
The buyer of a call option has an obligation to perform.
A call option is in the money when the strike price is below
the stock price.
The lower the strike price relative to the stock’s underlying
price, the more the call option is worth.
Question #110 of 120
Question ID: 1146458
A bank borrows for 360 days and simultaneously lends the proceeds for 90 days. This transaction creates a synthetic forward
rate agreement (FRA) closest to:
a long position in a 90-day FRA on 270-day LIBOR.
a long position in a 90-day FRA on 360-day LIBOR.
a short position in a 360-day FRA on 90-day LIBOR.
Question #111 of 120
Question ID: 1146462
An American-style call option is most likely to be more valuable than an otherwise equivalent European-style call option if:
the call is deep in the money.
its underlying asset is a semiannual-pay bond.
implied volatility increases during the life of the call.
Question #112 of 120
Question ID: 1146450
Which of the following statements about futures and forwards is most accurate? Futures:
are subject to default risk, but forwards are not.
are individualized contracts, but forwards are
standardized.
require that traders post margin in order to trade, but
forwards typically require no cash transaction until the
delivery date.
Question #113 of 120
Question ID: 1146452
Derivatives markets are most likely to:
reduce transactions costs.
increase speculation and risk.
provide arbitrage opportunities to investors.
Question #114 of 120
Question ID: 1146456
Derivatives pricing is based on the assumption that:
no arbitrage occurs.
the law of one price holds.
long and short investors are net risk-neutral.
Question #115 of 120
Question ID: 1146472