Davidson; Management - 3rd Australasian Edition



1.
Hedgers always buy futures contracts.
A. True
B. False


2.
Writing calls can generate potentially unlimited losses.
A. True
B. False


3.
The price sensitivity rule assists the hedger by estimating the number of futures contracts to trade.
A. True
B. False


4.
Most forward market contracts are settled before delivery.
A. True
B. False


5.
The buyer of a forward contract is said to have a short position while the seller of a forward contract is said to have a long position.
A. True
B. False


6.
Position limits in financial futures are maximum numbers of contracts that an investor can buy.
A. True
B. False


7.
The forward price for an asset is the spot price.
A. True
B. False


8.
Basis risk involves the risk that the price of futures contracts will not vary in exactly the same way as the price of the item being hedged.
A. True
B. False


9.
A swap entails buying and selling a futures contract at the same time.
A. True
B. False


10.
Options can provide their buyers with insurance against adverse price movement.
A. True
B. False


11.
A futures contract involves a hedger (risk averter) and a speculator (risk taker).
A. True
B. False


12.
Options premiums vary directly with the maturity of the option.
A. True
B. False


13.
Futures markets involve more standardized contracts compared to forward markets.
A. True
B. False


14.
An interest rate swap dealer combines two parties into one swap contract.
A. True
B. False


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