Hull_OFOD9e_MultipleChoice_Questions_Only_Ch02.doc

Hull: Options, Futures, and Other Derivatives, Ninth Edition Chapter 2: Mechanics of Fu Futures tures Markets Multiple Choice Test Bank: uestions 1. Which Which of of the foll follow owing ing is is true true A. Both forward forward and and futures futures contracts contracts are are traded on exchanges. exchanges. B. Forward Forward contracts contracts are traded traded on exchanges, exchanges, but futures contracts are are not. C. Futures Futures contracts contracts are are traded on exchanges, exchanges, but but forward forward contracts are are not. D. Neither futures futures contracts contracts nor nor forward forward contracts contracts are traded on exchanges.

2. Which Which of the follow following ing is is NO true A. Futures Futures contracts contracts nearl! nearl! alwa!s last longer than forward forward contracts contracts B. Futures Futures contracts contracts are are standardi"ed# standardi"ed# forward forward contracts are not. C. Deli$er! or %nal cash cash settle&ent usuall! ta'es (lace with with forward forward contracts# the sa&e is not true of futures contracts. contracts. D. Forward Forward contracts contracts usuall! usuall! ha$e one s(eci%ed deli$er! deli$er! date# futures futures contract often ha$e a range of deli$er! dates.

). *n the corn corn futures futures contract contract a nu&ber nu&ber of di+erent di+erent t!(es of corn corn can can be deli$ered with (rice ad-ust&ents s(eci%ed b! the exchange and there are a nu&ber of di+erent deli$er! locations. Which of the following is true A. his /exibi /exibilit! lit! tends tends increase increase the future futures s (rice. B. his /exibi /exibilit! lit! tends tends decrease decrease the future futures s (rice. C. his /exibilit! /exibilit! &a! increase increase and &a! decrease decrease the the futures futures (rice. D. his /exibi /exibilit! lit! has no no e+ect on the futur futures es (rice (rice

0. A co&(an! enters into a short futures futures contract to sell , units of a co&&odit! for 3 cents (er unit. he initial &argin is 40, and the &aintenance &argin is 4),. What is the futures (rice (er unit abo$e which there will be a &argin call5 A. 36 cents B. 37 cents C. 30 cents D. 32 cents ents

. A co&(an! enters into a long futures futures contract to bu! 1, units of a co&&odit! for 47 (er unit. he initial &argin is 47, and the &aintenance &argin is 40,. What futures (rice will allow 42, to be withdrawn fro& the &argin account5 A. 46 B. 472 C. 470

D. 477

7. One futures contract is traded where both the long and short (arties are closing out existing (ositions. What is the resultant change in the o(en interest5 A. No change B. Decrease b! one C. Decrease b! two D. *ncrease b! one

3. Who initiates deli$er! in a corn futures contract A. he (art! with the long (osition B. he (art! with the short (osition C. 8ither (art! D. he exchange

6. 9ou sell one Dece&ber futures contracts when the futures (rice is 41,1 (er unit. 8ach contract is on 1 units and the initial &argin (er contract that !ou (ro$ide is 42,. he &aintenance &argin (er contract is 41,. During the next da! the futures (rice rises to 41,12 (er unit. What is the balance of !our &argin account at the end of the da!5 A. 41,6 B. 4),) C. 42,2 D. 4),3

:. A hedger ta'es a long (osition in a futures contract on a co&&odit! on No$e&ber 1, 212 to hedge an ex(osure on ;arch 1, 21). he initial futures (rice is 47. On Dece&ber )1, 212 the futures (rice is 471. On ;arch 1, 21) it is 470. he contract is closed out on ;arch 1, 21). What gain is recogni"ed in the accounting !ear uarterl!

12.;argin accounts ha$e the e+ect of  A. ?educing the ris' of one (art! regretting the deal and bac'ing out B. 8nsuring funds are a$ailable to (a! traders when the! &a'e a (ro%t C. ?educing s!ste&ic ris' due to colla(se of futures &ar'ets D. All of the abo$e 1).Which entit! in the @nited tates ta'es (ri&ar! res(onsibilit! for regulating futures &ar'et5 A. Federal ?eser$e Board B. Co&&odities Futures rading Co&&ission CFC C. ecurit! and 8xchange Co&&ission 8C D. @ reasur! 10.For a futures contract trading in A(ril 212, the o(en interest for a