Financial Derivatives Quiz Set 5

1) If, for a Rs. 1000 premium, you buy a Rs. 100,000 call option on bond futures with a strike price of 114, and at the expiration date the price is 110?

Correct! Wrong!

2) If, for a Rs. 1000 premium, you buy a Rs. 100,000 put option on bond futures with a strike price of 110, and at the expiration date the price is 114?

Correct! Wrong!

3) If, for a Rs. 1000 premium, you buy a Rs. 100,000 put option on bond futures with a strike price of 114, and at the expiration date the price is 110?

Correct! Wrong!

4) The main advantage of using options on futures contracts rather than the futures contracts themselves is that?

Correct! Wrong!

5) The main reason to buy an option on a futures contract rather than the futures contract is?

Correct! Wrong!

6) The main disadvantage of hedging with futures contracts as compared to options on futures contracts is that futures?

Correct! Wrong!

7) If a bank manager wants to protect the bank against losses that would be incurred on its portfolio of treasury securities should interest rates rise, he could?

Correct! Wrong!

8) Hedging by buying an option?

Correct! Wrong!

9) All other things held constant, premiums on options will increase when the?

Correct! Wrong!

10) All other things held constant, premiums on call options will increase when the?

Correct! Wrong!

11) An increase in the exercise price, all other things held constant, will ______ the call option premium?

Correct! Wrong!

12) All other things held constant, premiums on options will increase when the?

Correct! Wrong!

13) An increase in the volatility of the underlying asset, all other things held constant, will ______ the option premium?

Correct! Wrong!

14) A tool for managing interest rate risk that requires exchange of payment streams is a?

Correct! Wrong!

15) A financial contract that obligates one party to exchange a set of payments it owns for another set of payments owned by another party is called a?

Correct! Wrong!

16) A swap that involves the exchange of a set of payments in one currency for a set of payments in another currency is as?

Correct! Wrong!

17) A swap that involves the exchange of one set of interest payments for another set of interest payments is called as?

Correct! Wrong!

18) A firm that sells goods to foreign countries on a regular basis can avoid exchange rate risk by?

Correct! Wrong!

19) The most common type of interest rate swap is?

Correct! Wrong!

20) If Second National Bank has more rate-sensitive assets than rate-sensitive liabilities, it can reduce interest rate risk with a swap that requires Second National to?

Correct! Wrong!

Financial Derivatives Quiz Set 5

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