Test Bank for An Introduction to Derivatives and Risk Management 10th Edition (Cengage, 2015) by Don M. Chance and Robert Brooks, Isbn no; 9781305104976, all 15 Chapters Covered

, CHAPTER 1: INTRODUCTION lk l k




MULTIPLE CHOICE TEST QUESTIONS
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1. The market value of the derivatives contracts worldwide totals
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a. less than a trillion dollars lk lk lk lk



b. in the hundreds of trillion dollars
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c. over a trillion dollars but less than a hundred trillion
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d. over quadrillion dollars lk lk



e. none of the above lk lk lk




2. Cash markets are also known as
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a. speculative markets lk



b. spot markets lk



c. derivative markets lk



d. dollar markets lk



e. none of the above lk lk lk




3. A call option gives the holder
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a. the right to buy something lk lk lk lk



b. the right to sell something lk lk lk lk



c. the obligation to buy something lk lk lk lk



d. the obligation to sell something lk lk lk lk



e. none of the above lk lk lk




4. Which of the following instruments are contracts but are not securities
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a. stocks
b. options
c. swaps
d. a and b lk lk



e. b and c lk lk




5. The positive relationship between risk and return is called
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a. expected return lk



b. market efficiency lk




10th lkEdition: l k Chapter 151 Test lkBank
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website, lkin lkwhole
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, c. the law of one price
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d. arbitrage
e. none of the above lk lk lk




6. A transaction in which an investor holds a position in the spot market and
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sells a futures contract or writes a call is
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a. a gamble lk



b. a speculative position
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c. a hedge lk



d. a risk-free transaction
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e. none of the above lk lk lk




7. Which of the following are advantages of derivatives?
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a. lower transaction costs than securities and commodities
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b. reveal information about expected prices and volatility
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c. help control risk lk lk



d. make spot prices stay closer to their true values
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10th lkEdition: l k Chapter 152 Test lkBank
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, e. all of the above
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8. A forward contract has which of the following characteristics?
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a. has a buyer and a seller lk lk lk lk lk



b. trades on an organized exchange lk lk lk lk



c. has a daily settlement lk lk lk



d. gives the right but not the obligation to buylk lk lk lk lk lk lk lk



e. all of the above lk lk lk




9. Options on futures are also known as
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a. spot options lk



b. commodity options lk



c. exchange options lk



d. security options lk



e. none of the above lk lk lk




10. A market in which the price equals the true economic value
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a. is risk-free lk



b. has high expected returns lk lk lk



c. is organized lk



d. is efficient lk



e. all of the above lk lk lk




11. Which of the following trade on organized exchanges?
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a. caps
b. forwards
c. options
d. swaps
e. none of the above lk lk lk




12. Which of the following markets is/are said to provide price discovery?
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a. futures
b. forwards
c. options
d. a and b lk lk




10th lkEdition: l k Chapter 153 Test lkBank
©1lk2015 lkCengage lkLearning. lkAll lkRights lkReserved. lkMay lknot lkbe lkscanned, lkcopied lkor lkduplicated, lkor lkposted lkto lka lkpublicly lkaccessible
website, lkin lkwhole
lk l k or lkin lkpart.