Hedgers use the futures markets to reduce price risk. Which of the following is not an...
Hedgers use the futures markets to reduce price risk. Which of the following is not an example of hedging?
Multiple Choice
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An importer with USD payables sells a USD futures contract.
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A fund manager sells a share market index futures contract.
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A long-term lender buys a 10-year Treasury bond futures contract.
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A corporate borrower sells a 90-day bank bill futures contract.
Homework Answers
Correct Answer is " An Importer with USD Payables sells a USD futures contact".
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Hedgers use the futures markets to reduce price risk. Which of
the following is not an...
Hedgers use the futures markets to reduce price risk. Which of the following are examples of...
Hedgers use the futures markets to reduce price risk. Which of the following are examples of hedging? Multiple Choice An equities investor sells a share price index futures contract. An Australian exporter with USD receivables buys an AUD futures contract on a US exchange. All of the answers provided. A borrower sells a Treasury bond futures contract. A borrower sells a Treasury bond futures contract.
A fund manager has a portfolio worth $75 million. The beta of the portfolio is 1.15. She plans to use 3-month futures contracts on S&P 500 to hedge the systematic risk over the next 2 months. The current 3-month futures price is 1315, and the mu
A fund manager has a portfolio worth $75 million. The beta of the portfolio is 1.15. She plans to use 3-month futures contracts on S&P 500 to hedge the systematic risk over the next 2 months. The current 3-month futures price is 1315, and the multiplier of the futures contract is $250 times the index. How many futures contracts should the fund manager trade in?
A hedger trying to reduce “inventory” risk can do so by shorting a futures contract. Which...
A hedger trying to reduce “inventory” risk can do so by shorting a futures contract. Which of the following is not a valid reason as to why he did not eliminate this inventory risk by simply selling the commodity in the spot market instead of hedging? He does not have the commodity in his possession He has liquidity problems in the cash market All of the above are valid reasons Please explain why the answer (is)/(is not) 2.
sume there are only three possible outcomes for the spot price of a commodity which underlies...
sume there are only three possible outcomes for the spot price of a commodity which underlies a futures contract at the maturity of that futures contract. As seen today, these prices (i.e. those at the maturity of the futures contract) are 90, 100 or 110 and each may occur with probability 1/3, 1/3 and 1/3. Further, assume that futures market prices are set in accordance with the theory of (normal) contango. Which of the following is a potential price that...
Loans made between borrowers and lenders are 1 Multiple Choice 84 nts liabilities to the lenders...
Loans made between borrowers and lenders are 1 Multiple Choice 84 nts liabilities to the lenders and assets to the borrowers since the borrower obtains the funds. assets to the lenders and liabilities of the borrowers since the promises are made to the lenders. not part of either parties' assets or liabilities until the loans are repaid liabilities to both the lenders and the borrowers. Financial intermediaries 2 Multiple Choice 2.94 points O can be banks, but not all financial...
11) Which of the following typically has the lowest yield? A) 5-year AAA corporate bond B)...
11) Which of the following typically has the lowest yield? A) 5-year AAA corporate bond B) 2-year U.S. Treasury note C) Fed Funds D) 3-month U.S. Treasury bill 12) Debt instruments are also called: A) adjustable notes B) credit instruments C) perpetual securities D) interest rate swaps 13) Which of the following characteristic is NOT fixed on a coupon bond? A) Current yield B) Coupon rate C) Maturity D) Par amount 14) If you purchased a U.S. Treasury at a...
1. Which of the following trades implies that ownership has been taken? a. Buying a futures...
1. Which of the following trades implies that ownership has been taken? a. Buying a futures contract. b. Selling a futures contract. c. Buying a stock. d. Shorting a stock. e. None of the above implies ownership. The following transactions are the only ones made during the first 4 days a futures contract trades. Answer question 2 based on this table. DAY TRANSACTION S O 1 A Long 30, B Short 30 2 A Long 55, C Short 55 3...
1) For U.S. Treasury bonds, what type of risk exists when rates are historically low? _______...
1) For U.S. Treasury bonds, what type of risk exists when rates are historically low? _______ A) Gap risk B) Interest-rate risk C) Default risk D) Reinvestment risk 2) Which of the following institutions assign ratings for bonds in the United States? _______ A) The Securities and Exchange Commission B) The Federal Reserve District Banks C) The U.S. Treasury D) Private companies such as Moody’s and Fitch 3) If the three-month Treasury bill yields 3.1% while the yield on a...
All of the statements below are not false, except: 1. Changes in interest rates represent a risk for both bor...
All of the statements below are not false, except: 1. Changes in interest rates represent a risk for both borrowers and investors because of diminishing investment prospects and increased cost of borrowing; II. Failure to pay accounts receivable on time by customers may have a significant negative impact on the capital base of a company; III. Companies involved in cross-border trades are subject to FX risks: IV. It is essential for banks to assess the creditworthiness of customers to mitigate...
Asset based lending is commonly used to finance leveraged buyouts. Which of the following is not...
Asset based lending is commonly used to finance leveraged buyouts. Which of the following is not true about such financing? The borrower generally pledges tangible assets as collateral. Lenders look at the target firm’s assets as their primary protection. Bank loans are secured frequently by receivables and inventory. Loans maturing in more than one year are often referred to as term loans. The target firm’s most liquid assets generally secure longer-term loans. Security provisions and protective covenants are included in...
sume there are only three possible outcomes for the spot price of a commodity which underlies a futures contract at the maturity of that futures contract. As seen today, these prices (i.e. those at the maturity of the futures contract) are 90, 100 or 110 and each may occur with probability 1/3, 1/3 and 1/3. Further, assume that futures market prices are set in accordance with the theory of (normal) contango. Which of the following is a potential price that...
Loans made between borrowers and lenders are 1 Multiple Choice 84 nts liabilities to the lenders and assets to the borrowers since the borrower obtains the funds. assets to the lenders and liabilities of the borrowers since the promises are made to the lenders. not part of either parties' assets or liabilities until the loans are repaid liabilities to both the lenders and the borrowers. Financial intermediaries 2 Multiple Choice 2.94 points O can be banks, but not all financial...
11) Which of the following typically has the lowest yield? A) 5-year AAA corporate bond B) 2-year U.S. Treasury note C) Fed Funds D) 3-month U.S. Treasury bill 12) Debt instruments are also called: A) adjustable notes B) credit instruments C) perpetual securities D) interest rate swaps 13) Which of the following characteristic is NOT fixed on a coupon bond? A) Current yield B) Coupon rate C) Maturity D) Par amount 14) If you purchased a U.S. Treasury at a...
1. Which of the following trades implies that ownership has been taken? a. Buying a futures contract. b. Selling a futures contract. c. Buying a stock. d. Shorting a stock. e. None of the above implies ownership. The following transactions are the only ones made during the first 4 days a futures contract trades. Answer question 2 based on this table. DAY TRANSACTION S O 1 A Long 30, B Short 30 2 A Long 55, C Short 55 3...
All of the statements below are not false, except: 1. Changes in interest rates represent a risk for both borrowers and investors because of diminishing investment prospects and increased cost of borrowing; II. Failure to pay accounts receivable on time by customers may have a significant negative impact on the capital base of a company; III. Companies involved in cross-border trades are subject to FX risks: IV. It is essential for banks to assess the creditworthiness of customers to mitigate...
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