, CHAPTER kk1: k k INTRODUCTION
MULTIPLE kkCHOICE kkTEST kkQUESTIONS
1. The kkmarket kkvalue kkof kkthe kkderivatives kkcontracts kkworldwide kktotals
a. less kkthan kka kktrillion kkdollars
b. in kkthe kkhundreds kkof kktrillion kkdollars
c. over kka kktrillion kkdollars kkbut kkless kkthan kka kkhundred kktrillion
d. over kkquadrillion kkdollars
e. none kkof kkthe kkabove
2. Cash kkmarkets kkare kkalso kkknown kkas
a. speculative kkmarkets
b. spot kkmarkets
c. derivative kkmarkets
d. dollar kkmarkets
e. none kkof kkthe kkabove
3. A kkcall kkoption kkgives kkthe kkholder
a. the kkright kkto kkbuy kksomething
b. the kkright kkto kksell kksomething
c. the kkobligation kkto kkbuy kksomething
d. the kkobligation kkto kksell kksomething
e. none kkof kkthe kkabove
4. Which kkof kkthe kkfollowing kkinstruments kkare kkcontracts kkbut kkare kknot kksecurities
a. stocks
b. options
c. swaps
d. a kkand kkb
e. b kkand kkc
5. The kkpositive kkrelationship kkbetween kkrisk kkand kkreturn kkis kkcalled
a. expected kkreturn
b. market kkefficiency
c. the kklaw kkof kkone kkprice
d. arbitrage
e. none kkof kkthe kkabove
6. A kktransaction kkin kkwhich kkan kkinvestor kkholds kka kkposition kkin kkthe kkspot kkmarket kkand
kksells kka kkfutures kkcontract kkor kkwrites kka kkcall kkis
a. a kkgamble
b. a kkspeculative kkposition
c. a kkhedge
d. a kkrisk-free kktransaction
e. none kkof kkthe kkabove
7. Which kkof kkthe kkfollowing kkare kkadvantages kkof kkderivatives?
a. lower kktransaction kkcosts kkthan kksecurities kkand kkcommodities
b. reveal kkinformation kkabout kkexpected kkprices kkand kkvolatility
c. help kkcontrol kkrisk
d. make kkspot kkprices kkstay kkcloser kkto kktheir kktrue kkvalues
10th kkEdition: 151 Test
k kkk2015
© Chapter kk1
kkCengage kkLearning. kkAll kkRights kkReserved. kkMay kknot kkbe kkscanned, kkcopied kkor kkduplicated, kkor kkposted kkto
kkBank
kka kkpublicly kkaccessible kkwebsite, kkin kkwhole k k or kkin kkpart.
, e. all kkof kkthe kkabove
8. A kkforward kkcontract kkhas kkwhich kkof kkthe kkfollowing kkcharacteristics?
a. has kka kkbuyer kkand kka kkseller
b. trades kkon kkan kkorganized kkexchange
c. has kka kkdaily kksettlement
d. gives kkthe kkright kkbut kknot kkthe kkobligation kkto kkbuy
e. all kkof kkthe kkabove
9. Options kkon kkfutures kkare kkalso kkknown kkas
a. spot kkoptions
b. commodity kkoptions
c. exchange kkoptions
d. security kkoptions
e. none kkof kkthe kkabove
10. A kkmarket kkin kkwhich kkthe kkprice kkequals kkthe kktrue kkeconomic kkvalue
a. is kkrisk-free
b. has kkhigh kkexpected kkreturns
c. is kkorganized
d. is kkefficient
e. all kkof kkthe kkabove
11. Which kkof kkthe kkfollowing kktrade kkon kkorganized kkexchanges?
a. caps
b. forwards
c. options
d. swaps
e. none kkof kkthe kkabove
12. Which kkof kkthe kkfollowing kkmarkets kkis/are kksaid kkto kkprovide kkprice kkdiscovery?
a. futures
b. forwards
c. options
d. a kkand kkb
e. b kkand kkc
13. Investors kkwho kkdo kknot kkconsider kkrisk kkin kktheir kkdecisions kkare kksaid kkto kkbe
a. speculating
b. short kkselling
c. risk kkneutral
d. traders
e. none kkof kkthe kkabove
14. Which kkof kkthe kkfollowing kkstatements kkis kknot kktrue kkabout kkthe kklaw kkof kkone kkprice
a. investors kkprefer kkmore kkwealth kkto kkless
b. investments kkthat kkoffer kkthe kksame kkreturn kkin kkall kkstates kkmust kkpay kkthe kkrisk-
free kkrate
c. if kktwo kkinvestment kkopportunities kkoffer kkequivalent kkoutcomes, kkthey kkmust kkhave
kkthe kksame kkprice
d. investors kkare kkrisk kkneutral
e. none kkof kkthe kkabove
10th kkEdition: 152 Test
k kkk2015
© Chapter kk1
kkCengage kkLearning. kkAll kkRights kkReserved. kkMay kknot kkbe kkscanned, kkcopied kkor kkduplicated, kkor kkposted kkto
kkBank
kka kkpublicly kkaccessible kkwebsite, kkin kkwhole k k or kkin kkpart.
, 15. Which kkof kkthe kkfollowing kkcontracts kkobligates kka kkbuyer kkto kkbuy kkor kksell kksomething kkat
kka kklater kkdate?
10th kkEdition: 153 Test
k kkk2015
© Chapter kk1
kkCengage kkLearning. kkAll kkRights kkReserved. kkMay kknot kkbe kkscanned, kkcopied kkor kkduplicated, kkor kkposted kkto
kkBank
kka kkpublicly kkaccessible kkwebsite, kkin kkwhole k k or kkin kkpart.
MULTIPLE kkCHOICE kkTEST kkQUESTIONS
1. The kkmarket kkvalue kkof kkthe kkderivatives kkcontracts kkworldwide kktotals
a. less kkthan kka kktrillion kkdollars
b. in kkthe kkhundreds kkof kktrillion kkdollars
c. over kka kktrillion kkdollars kkbut kkless kkthan kka kkhundred kktrillion
d. over kkquadrillion kkdollars
e. none kkof kkthe kkabove
2. Cash kkmarkets kkare kkalso kkknown kkas
a. speculative kkmarkets
b. spot kkmarkets
c. derivative kkmarkets
d. dollar kkmarkets
e. none kkof kkthe kkabove
3. A kkcall kkoption kkgives kkthe kkholder
a. the kkright kkto kkbuy kksomething
b. the kkright kkto kksell kksomething
c. the kkobligation kkto kkbuy kksomething
d. the kkobligation kkto kksell kksomething
e. none kkof kkthe kkabove
4. Which kkof kkthe kkfollowing kkinstruments kkare kkcontracts kkbut kkare kknot kksecurities
a. stocks
b. options
c. swaps
d. a kkand kkb
e. b kkand kkc
5. The kkpositive kkrelationship kkbetween kkrisk kkand kkreturn kkis kkcalled
a. expected kkreturn
b. market kkefficiency
c. the kklaw kkof kkone kkprice
d. arbitrage
e. none kkof kkthe kkabove
6. A kktransaction kkin kkwhich kkan kkinvestor kkholds kka kkposition kkin kkthe kkspot kkmarket kkand
kksells kka kkfutures kkcontract kkor kkwrites kka kkcall kkis
a. a kkgamble
b. a kkspeculative kkposition
c. a kkhedge
d. a kkrisk-free kktransaction
e. none kkof kkthe kkabove
7. Which kkof kkthe kkfollowing kkare kkadvantages kkof kkderivatives?
a. lower kktransaction kkcosts kkthan kksecurities kkand kkcommodities
b. reveal kkinformation kkabout kkexpected kkprices kkand kkvolatility
c. help kkcontrol kkrisk
d. make kkspot kkprices kkstay kkcloser kkto kktheir kktrue kkvalues
10th kkEdition: 151 Test
k kkk2015
© Chapter kk1
kkCengage kkLearning. kkAll kkRights kkReserved. kkMay kknot kkbe kkscanned, kkcopied kkor kkduplicated, kkor kkposted kkto
kkBank
kka kkpublicly kkaccessible kkwebsite, kkin kkwhole k k or kkin kkpart.
, e. all kkof kkthe kkabove
8. A kkforward kkcontract kkhas kkwhich kkof kkthe kkfollowing kkcharacteristics?
a. has kka kkbuyer kkand kka kkseller
b. trades kkon kkan kkorganized kkexchange
c. has kka kkdaily kksettlement
d. gives kkthe kkright kkbut kknot kkthe kkobligation kkto kkbuy
e. all kkof kkthe kkabove
9. Options kkon kkfutures kkare kkalso kkknown kkas
a. spot kkoptions
b. commodity kkoptions
c. exchange kkoptions
d. security kkoptions
e. none kkof kkthe kkabove
10. A kkmarket kkin kkwhich kkthe kkprice kkequals kkthe kktrue kkeconomic kkvalue
a. is kkrisk-free
b. has kkhigh kkexpected kkreturns
c. is kkorganized
d. is kkefficient
e. all kkof kkthe kkabove
11. Which kkof kkthe kkfollowing kktrade kkon kkorganized kkexchanges?
a. caps
b. forwards
c. options
d. swaps
e. none kkof kkthe kkabove
12. Which kkof kkthe kkfollowing kkmarkets kkis/are kksaid kkto kkprovide kkprice kkdiscovery?
a. futures
b. forwards
c. options
d. a kkand kkb
e. b kkand kkc
13. Investors kkwho kkdo kknot kkconsider kkrisk kkin kktheir kkdecisions kkare kksaid kkto kkbe
a. speculating
b. short kkselling
c. risk kkneutral
d. traders
e. none kkof kkthe kkabove
14. Which kkof kkthe kkfollowing kkstatements kkis kknot kktrue kkabout kkthe kklaw kkof kkone kkprice
a. investors kkprefer kkmore kkwealth kkto kkless
b. investments kkthat kkoffer kkthe kksame kkreturn kkin kkall kkstates kkmust kkpay kkthe kkrisk-
free kkrate
c. if kktwo kkinvestment kkopportunities kkoffer kkequivalent kkoutcomes, kkthey kkmust kkhave
kkthe kksame kkprice
d. investors kkare kkrisk kkneutral
e. none kkof kkthe kkabove
10th kkEdition: 152 Test
k kkk2015
© Chapter kk1
kkCengage kkLearning. kkAll kkRights kkReserved. kkMay kknot kkbe kkscanned, kkcopied kkor kkduplicated, kkor kkposted kkto
kkBank
kka kkpublicly kkaccessible kkwebsite, kkin kkwhole k k or kkin kkpart.
, 15. Which kkof kkthe kkfollowing kkcontracts kkobligates kka kkbuyer kkto kkbuy kkor kksell kksomething kkat
kka kklater kkdate?
10th kkEdition: 153 Test
k kkk2015
© Chapter kk1
kkCengage kkLearning. kkAll kkRights kkReserved. kkMay kknot kkbe kkscanned, kkcopied kkor kkduplicated, kkor kkposted kkto
kkBank
kka kkpublicly kkaccessible kkwebsite, kkin kkwhole k k or kkin kkpart.
