Financial Risk Management Final Exam with all Correct
& 100% Verified Answers |Latest Update |Already
Graded A+
Futures prices are discovered by: ✔Correct Answer-when contracts are bought and sold
The premise that makes hedging possible is cash and futures prices: ✔Correct Answer-generally
change in the same direction by similar amounts
Open interest refers to: ✔Correct Answer-total number of futures that have not been offset or
fulfilled by delivery
To hedge against an increase in prices, you would: ✔Correct Answer-purchase futures contracts
The primary function of the exchanges is to: ✔Correct Answer-ensure the financial integrity of the
contracts traded, and clear every trade made at the CME Group
The CFTC's main responsibilities are to: ✔Correct Answer-protect the trading public from fraud and
trading abuses on the exchange, protect the trading public from fraud and trading abuses off the
exchange, prevent price distortions and manipulations, encourage overall competitiveness and
efficiency on all U.S exchanges
Gains and losses on futures positions are settled: ✔Correct Answer-each day after the close of
trading
Hedging involves: ✔Correct Answer-taking a futures position opposite to one's current cash market
position
Futures contacts are: ✔Correct Answer-standardized agreement to buy or sell a specific quantity
and quality of an underlying asset at a certain price on a specified future date
What do speculators do: ✔Correct Answer-assume market price risk while looking for profit
opportunities, anticipate profiting from trading, believe that commodities can help diversify
portfolios, provide liquidity
The price of a stock is $64. A trader buys one put option contract on the stock with a strike price of
$60 when the option price is $10. When does the trader make a profit? ✔Correct Answer-When
the stock price is below $50. The payoff must be more than the $10 paid for the option. The stock
price must, therefore, be below $50.
The price of a stock is $67. A trader sells five put option contracts (each contract is 100 options) on
the stock with a strike price of $70 when the option price is $4. The options are exercised when the
stock price is $69. What is the trader's net profit or loss? ✔Correct Answer-Gain of $1500, The
option payoff is 70 − 69 = $1. The amount received for the option is $4. The gain is $3 per option. In
total 5 × 100 = 500 options are sold. The total gain is therefore $3 × 500 = $1,500.
& 100% Verified Answers |Latest Update |Already
Graded A+
Futures prices are discovered by: ✔Correct Answer-when contracts are bought and sold
The premise that makes hedging possible is cash and futures prices: ✔Correct Answer-generally
change in the same direction by similar amounts
Open interest refers to: ✔Correct Answer-total number of futures that have not been offset or
fulfilled by delivery
To hedge against an increase in prices, you would: ✔Correct Answer-purchase futures contracts
The primary function of the exchanges is to: ✔Correct Answer-ensure the financial integrity of the
contracts traded, and clear every trade made at the CME Group
The CFTC's main responsibilities are to: ✔Correct Answer-protect the trading public from fraud and
trading abuses on the exchange, protect the trading public from fraud and trading abuses off the
exchange, prevent price distortions and manipulations, encourage overall competitiveness and
efficiency on all U.S exchanges
Gains and losses on futures positions are settled: ✔Correct Answer-each day after the close of
trading
Hedging involves: ✔Correct Answer-taking a futures position opposite to one's current cash market
position
Futures contacts are: ✔Correct Answer-standardized agreement to buy or sell a specific quantity
and quality of an underlying asset at a certain price on a specified future date
What do speculators do: ✔Correct Answer-assume market price risk while looking for profit
opportunities, anticipate profiting from trading, believe that commodities can help diversify
portfolios, provide liquidity
The price of a stock is $64. A trader buys one put option contract on the stock with a strike price of
$60 when the option price is $10. When does the trader make a profit? ✔Correct Answer-When
the stock price is below $50. The payoff must be more than the $10 paid for the option. The stock
price must, therefore, be below $50.
The price of a stock is $67. A trader sells five put option contracts (each contract is 100 options) on
the stock with a strike price of $70 when the option price is $4. The options are exercised when the
stock price is $69. What is the trader's net profit or loss? ✔Correct Answer-Gain of $1500, The
option payoff is 70 − 69 = $1. The amount received for the option is $4. The gain is $3 per option. In
total 5 × 100 = 500 options are sold. The total gain is therefore $3 × 500 = $1,500.
