FUTURES & DERIVATIVES

What is the primary purpose of financial futures?

• To predict financial market trends

• To hedge against price movements and manage risk

• To eliminate the need for physical transactions

• To increase the volatility in financial markets

   

Which of the following assets can be the underlying in a financial futures contract?

• Real estate

• Precious metals only

• Interest rates, currencies, and stock indices

• Physical goods only

What role does a clearinghouse play in futures trading?

• Advises investors on which futures to buy

• Guarantees the performance of each contract

• Directly sets the prices of futures contracts

• Eliminates the need for margin calls

Which of the following are commodities traded in futures contracts?

• Electronics and appliances

• Finished consumer goods

• Agricultural products and metals

• Services and intangible assets

What does backwardation in commodity markets indicate?

• Excessive speculation in the futures market

• Lower demand for immediate delivery in the spot market

• Lower storage costs associated with futures contracts

• Temporary supply shortage and immediate market demand

What does the expiration date indicate in an options contract?

• The date of the contract's creation

• The date on which the strike price is determined

• The date when the option contract becomes invalid

• The date when the underlying asset is delivered

What does a call option provide the holder the right to do?

• Buy the underlying asset at the strike price

• Sell the underlying asset at the strike price

• Buy the underlying asset at the current price

• Sell the underlying asset at the current price

Which of the following best describes a warrant?

• A contract for exchanging cash flows based on predetermined terms

• An option contract for buying or selling an underlying asset at a specified price

• A contract for exchanging currencies at a predetermined rate

• An agreement to receive the total return of an underlying asset

What is the primary purpose of a swap?

• Speculation

• Hedging

• Leveraging

• All of the above

Which of the following involves ongoing cash flows based on rates or prices?

• Warrants

• Swaps

• Both warrants and swaps

• Neither warrants nor swaps