Charles P. Jones, Investment: Principles and Concepts, Twelfth Edition, John Wiley & Sons test bank.

Ch.20, Chapter 20: FUTURES



Multiple Choice Questions


1. Spot markets are for immediate delivery. Forward prices are:

a. The price agreed upon today for an asset for deferred delivery in the future.
b. The price in the future for an asset delivered in the future.
c. The price today for a forward price in the future.
d. Based on current spot market prices.

Ans: a
Difficulty: Moderate
Ref: An Overview of Futures Markets

2. A forward contract differs from a futures contract in that:

a. a forward contract is for a shorter period of time.
b. a forward contract does not specify the selling price.
c. a forward contract does specify the selling price.
d. a forward contract is non-binding.

Ans: c
Difficulty: Moderate
Ref: Understanding Futures Markets

3. Futures contracts are regulated by the:

a. Securities Exchange Commission.
b. National Association of Security Dealers.
c. National Association of Commodity Dealers.
d. Commodity Futures Trading Commission.

Ans: d
Difficulty: Easy
Ref: Understanding Futures Markets

4. A futures contract is

a. a nonnegotiable, nonmarketable instrument.
b. a security, like stocks and bonds.
c. a standardized transferable agreement providing for the deferred delivery
of a specified traded quantity of a commodity.
d. not a legal contract, and therefore its terms can be changed .

Ans: c

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,Difficulty: Easy
Ref: Understanding Futures Markets

5. Futures contracts were first traded on

a. stock indexes.
b. foreign currencies.
c. commodities.
d. government bonds.

Ans: c
Difficulty: Easy
Ref: Understanding Futures Markets

6. Which of the following variables is not established on a futures contract?

a. contract size
b. price
c. delivery date
d. specified grade

Ans: b
Difficulty: Easy
Ref: Understanding Futures Markets

7. Futures trade on the:

a. Spot market.
b. b. over-the-counter market.
c. forward exchanges.
d. futures exchanges.

Ans: d
Difficulty: Easy
Ref: The Structure of Futures Markets

8. Futures exchange members:

a. trade strictly for their own accounts.
b. trade strictly for others.
c. can trade for their own accounts or for others.
d. are all controlled by commodity firms.

Ans: c
Difficulty: Moderate
Ref: The Structure of Futures Markets

9. On the other side of every futures transaction is:


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Futures

, a. the dealer.
b. the futures exchange.
c. the commodity producer.
d. the clearinghouse.

Ans: d
Difficulty: Moderate
Ref: The Structure of Futures Markets

10. Which of the following exchanges claims that its 3,600 members trade 50
different futures and options products by open auction and electronically?:

a. Chicago Board Options Exchange.
b. Chicago Board of Trade.
c. Chicago Mercantile Exchange.
d. Globex.

Ans: b
Difficulty: Moderate
Ref: The Structure of Futures Markets

11. In the case of a futures contract, buyers can settle a contract

a. only by taking delivery.
b. only by arranging an offsetting contract.
c. either by delivery or offset.
d. by a combination of delivery and offset.

Ans: c
Difficulty: Easy
Ref: The Mechanics of Trading

12. Approximately what percentage of futures contracts is closed by offset before the
contract expires:

a. 25.
b. 50
c. 95.
d. 75.

Ans: c
Difficulty: Moderate
Ref: The Mechanics of Trading

13. When trading futures, margin

a. is seldom used.
b. indicates that credit is being extended.
c. is a down payment.

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Futures