BUS 288-An over-the-counter forward contract
1. An over-the-counter forward contract:a. Is marked-to-market dailyb. Will be closed-out by the clearing house if a margin call is ignoredc. Is not subject to daily settlementd. Rarely involves physical delivery2. Equity markets involve:a. A permanent transfer of fundsb. A temporary transfer of fundsc. A predetermined return to investorsd. Both B and D3. Relative to the maturity of a bond, the duration is:a. longer when interest rates exceed the coupon rate b. longer when interest rates are less than the coupon ratec. shorter when the bond does not pay coupon interestd. shorter when the bond does pay coupon interest4. If a short futures position is held by a hedger, a corresponding long futures position must be held by:a. a speculator b. a hedger c. an arbitrageurd. any of the above5. Floating rate notes have a duration that:a. is infiniteb. is equal to one plus the yield divided by the yieldc. is at least equal to the time between coupon paymentsd. is at most equal to the time between coupon payments6. If an individual who takes a short position in a futures contract wishes to realise a profit from their position, they should:a. find a buyer and sell their positionb. offset their original contract by entering into another as a sellerc. offset their original contract by entering into another as a buyerd. take delivery of the commodity7. Which of the following statements is incorrect?a. Arbitrageurs are motivated to earn a profitb. Arbitrageurs are motivated to reduce the risk of an existing exposurec. Arbitrageurs aim for a risk-free positiond. Arbitrageurs profit from inconsistent pricing
