FI 412 Chapter 24: Hedging with
Financial Derivatives Questions with
100% Correct Answers
Financial derivatives include:
a. Stocks
b. Bonds
c. Futures
d. NOTA Correct Answer: C. Futures
Financial derivatives include:
a. Stocks
b. Bonds
c. Forward Contracts
d. Both A and B Correct Answer: c. Forward Contracts
Which of the following is not a financial derivative?
a. Stocks
b. Futures
c. Options
,d. Forward Contracts Correct Answer: a. Stocks
A contract that calls for the investor to (possibly) buy securities on a future date
is called a:
a. Short Contract
b. Long Contract
c. Hedge
d. Cross Correct Answer: b. Long Contract
A contract that calls for an investor to (possibly) sell securities on a future date is
called a:
a. Short Contract
b. Long Contract
c. Hedge
d. Micro Hedge Correct Answer: a. Short Contract
With a long contract, the investor (may):
a. Sell securities in the future
b. Buy securities in the future
c. Hedge in the future
d. Close out his position in the future Correct Answer: b. Buy securities in the
future
, With a short contract, the investor (may):
a. Sell securities in the future
b. Buy securities in the future
c. Hedge in the future
d. Close out his position in the future Correct Answer: a. Sell securities in the
future
Which is not a problem of forward contracts?
a. Lack of liquidity
b. Lack of flexibility
c. Difficulty of finding a counterparty
d. Default risk Correct Answer: b. Lack of flexibility
By selling short a futures contract of $100,000 at a price of 115, you are agreeing
to deliver ___ face value securities for ___.
a. $100,000; $115,000
b. $115,000; $100,000
c. $100,000; $100,000
d. $115,000; $115,000 Correct Answer: a. $100,000; $115,000
By selling short a futures contract of $100,000 at a price of 96, you are agreeing
to deliver ___ face value securities for ___.
Financial Derivatives Questions with
100% Correct Answers
Financial derivatives include:
a. Stocks
b. Bonds
c. Futures
d. NOTA Correct Answer: C. Futures
Financial derivatives include:
a. Stocks
b. Bonds
c. Forward Contracts
d. Both A and B Correct Answer: c. Forward Contracts
Which of the following is not a financial derivative?
a. Stocks
b. Futures
c. Options
,d. Forward Contracts Correct Answer: a. Stocks
A contract that calls for the investor to (possibly) buy securities on a future date
is called a:
a. Short Contract
b. Long Contract
c. Hedge
d. Cross Correct Answer: b. Long Contract
A contract that calls for an investor to (possibly) sell securities on a future date is
called a:
a. Short Contract
b. Long Contract
c. Hedge
d. Micro Hedge Correct Answer: a. Short Contract
With a long contract, the investor (may):
a. Sell securities in the future
b. Buy securities in the future
c. Hedge in the future
d. Close out his position in the future Correct Answer: b. Buy securities in the
future
, With a short contract, the investor (may):
a. Sell securities in the future
b. Buy securities in the future
c. Hedge in the future
d. Close out his position in the future Correct Answer: a. Sell securities in the
future
Which is not a problem of forward contracts?
a. Lack of liquidity
b. Lack of flexibility
c. Difficulty of finding a counterparty
d. Default risk Correct Answer: b. Lack of flexibility
By selling short a futures contract of $100,000 at a price of 115, you are agreeing
to deliver ___ face value securities for ___.
a. $100,000; $115,000
b. $115,000; $100,000
c. $100,000; $100,000
d. $115,000; $115,000 Correct Answer: a. $100,000; $115,000
By selling short a futures contract of $100,000 at a price of 96, you are agreeing
to deliver ___ face value securities for ___.
