Futures Contracts

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Question 1

Free

Multiple Choice

The Country Farm and the Cookie Maker met today and agreed to exchange wheat six months from now at a price which they negotiated today.This agreement was made between the two firms and did not pass through an organized exchange.Which one of the following best describes this transaction?

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futures contract

spot market

cash market

forward contract

CME transaction

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Question 2

Free

Multiple Choice

Which one of the following is a contract managed by an organized exchange that allows a buyer and seller to agree on a price today for an exchange of goods that will occur sometime in the future?

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futures contract

spot market

cash market

forward contract

discounted contract

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Question 3

Free

Multiple Choice

A futures price is a price that is negotiated _ and paid _ .

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today; in the future

today; today

in the future; in the future

in the future; today

either today or in the future; in the future

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Question 4

Free

Multiple Choice

You have a market position which allows you to profit when market prices increase but causes you a loss when market prices decline.This position is defined by which one of the following terms?

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forward position

futures position

long position

short position

speculative position

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Question 5

Free

Multiple Choice

When does the holder of a short position realize a profit?

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when prices rise

when prices either remain constant or rise

when prices remain constant

when prices either remain constant or decline

when prices decline

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Question 6

Multiple Choice

An investor who accepts the risk of a loss in exchange for the chance to earn a profit is referred to as which one of the following?

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hedger

short seller

speculator

broker

dealer

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Question 7

Multiple Choice

An investor who shifts risk is referred to as which one of the following?

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hedger

short seller

speculator

broker

dealer

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Question 8

Multiple Choice

A financial instrument on which a futures contract is based is called which one of the following?

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hedged security

short position

long position

speculative asset

underlying asset

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Question 9

Multiple Choice

You own 450,000 bushels of wheat.If you decide to add a short futures position in wheat you will be taking which one of the following positions?

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short hedge

long hedge

program trade

short arbitrage

long arbitrage

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Question 10

Multiple Choice

A futures position that is equal,but opposite,the position you have in the underlying asset defines which one of the following terms?

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short hedge

long hedge

full hedge

partial hedge

underlying hedge

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Question 11

Multiple Choice

A long hedge is the addition of which one of the following to a short position in the underlying asset?

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short spot position

any spot position

any futures position

long futures position

either a short spot or short futures position

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Question 12

Multiple Choice

Futures margin is defined as the deposit of funds into a futures trading account for which one of the following purposes?

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purchase additional futures contracts

take a hedge position in the future

cover potential losses from outstanding positions

cover the trading costs and commissions

cover the future costs of reversing the position

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Question 13

Multiple Choice

Which one of the following terms applies to the amount of money required when a futures position is first bought or sold?

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original deposit

initial margin

spot margin

equity deposit

mark-to-market

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Question 14

Multiple Choice

Which one of the following terms is defined as the process of recognizing gains and losses on outstanding futures positions on a daily basis?

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profit taking

margin adjusting

daily distributing

market adjusting

marking-to-market

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Question 15

Multiple Choice

Which one of the following is the definition of maintenance margin?

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initial amount required when a futures contract is either bought or sold

maximum amount of margin permitted for a futures account

minimum margin required in a futures account at all times

the additional amount requested in a margin call

the minimum amount needed to reverse a futures position

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Question 16

Multiple Choice

Which one of the following is a notification to a futures contract holder that additional margin funds are needed?

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marking-to-market

deposit call

shortage notice

margin call

marking call

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Question 17

Multiple Choice

Which one of the following is a trade that will close out a previously established futures position?

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maintenance call

margin call

reverse trade

position reversal

margin closeout

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Question 18

Multiple Choice

Which one of the following is the price of a commodity designated for delivery today?

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daily price

marked price

margin price

arbitrage price

cash price

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Question 19

Multiple Choice

Which one of the following is another name for the cash market?

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futures market

forward market

arbitrage market

current basis market

spot market

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Question 20

Multiple Choice

Which one of the following is the strategy of earning risk-free profits by taking advantage of any unusual differences between cash and futures prices?

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cash-futures arbitrage

mark-to-market

margin calling

basis recognition

cash spotting

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Futures Contracts

The Country Farm and the Cookie Maker met today and agreed to exchange wheat six months from now at a price which they negotiated today.This agreement was made between the two firms and did not pass through an organized exchange.Which one of the following best describes this transaction?

Which one of the following is a contract managed by an organized exchange that allows a buyer and seller to agree on a price today for an exchange of goods that will occur sometime in the future?

A futures price is a price that is negotiated _____ and paid _____ .

You have a market position which allows you to profit when market prices increase but causes you a loss when market prices decline.This position is defined by which one of the following terms?

When does the holder of a short position realize a profit?

An investor who accepts the risk of a loss in exchange for the chance to earn a profit is referred to as which one of the following?

An investor who shifts risk is referred to as which one of the following?

A financial instrument on which a futures contract is based is called which one of the following?

You own 450,000 bushels of wheat.If you decide to add a short futures position in wheat you will be taking which one of the following positions?

A futures position that is equal,but opposite,the position you have in the underlying asset defines which one of the following terms?

A long hedge is the addition of which one of the following to a short position in the underlying asset?

Futures margin is defined as the deposit of funds into a futures trading account for which one of the following purposes?

Which one of the following terms applies to the amount of money required when a futures position is first bought or sold?

Which one of the following terms is defined as the process of recognizing gains and losses on outstanding futures positions on a daily basis?

Which one of the following is the definition of maintenance margin?

Which one of the following is a notification to a futures contract holder that additional margin funds are needed?

Which one of the following is a trade that will close out a previously established futures position?

Which one of the following is the price of a commodity designated for delivery today?

Which one of the following is another name for the cash market?

Which one of the following is the strategy of earning risk-free profits by taking advantage of any unusual differences between cash and futures prices?

A futures price is a price that is negotiated _ and paid _ .