Financial Instruments Paper 8

1

A contractual arrangement that gives the owner the right to buy or sell an asset at a fixed price at any moment in time before or on a specified date is a(n)






2

Which of the following is exercisable only at the expiration date?






3

If a corporation holds a forward contract for the delivery of U.S. Treasury bonds in 6 months and, during those 6 months, interest rates decline, at the end of the 6 months the value of the forward contract will have






4

The use of derivatives to either hedge or speculate results in






5

If a call option is “out of the money,”






6

You are currently holding a call option on a stock with an exercise price of $100. If the current stock price is $90, your net proceeds by exercising this option will be






7

The type of option that does not have the backing of stock is called a(n)






8

How much must the stock be worth at expiration in order for a call holder to break even if the exercise price is $60 and the call premium was $3?






9

Which one of the following is not a determinant in valuing a call option?






10

A forward contract involves a commitment today to purchase a product






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