Worksheet content

___ option can only be exercised on the expiration date.

• An American
• A North American
• A Mexican
• A European

An investor who goes short in a futures contract will ___ any increase in value of the underlying asset and will ___ any decrease in value in the underlying asset.

• pay; pay
• pay; receive
• receive; receive
• receive; pay

The advantage that standardization of futures contracts brings is that ___ is improved because ___.

• credit risk; all traders understand the risk of the contracts
• pricing; convergence is more likely to take place with fewer contracts
• liquidity; all traders must trade a small set of identical contracts
• trading cost; trading volume is reduced

Investor A bought a call option that expires in 6 months. Investor B wrote a put option with a 9-month maturity. All else equal, as the time to expiration approaches, the value of investor A's position will ___ and the value of investor B's position will ___.

• decrease; increase
• decrease; decrease
• increase; increase
• increase; decrease

Which one of the following contracts requires no cash to change hands when initiated?

• Listed put option
• Short futures contract
• Forward contract
• Listed call option

___ did not develop a popular method for risk-adjusted performance evaluation of mutual funds.

• Eugene Fama
• Jack Treynor
• William Sharpe
• Michael Jensen

Most professionally managed equity funds generally

• underperform the S&P 500 Index on raw return measures and outperform the S&P 500 Index on risk-adjusted return measures.
• outperform the S&P 500 Index on raw return measures and underperform the S&P 500 Index on risk-adjusted return measures.
• underperform the S&P 500 Index on both raw and risk-adjusted return measures.
• outperform the S&P 500 Index on both raw and risk-adjusted return measures.

Hedge funds ___ engage in market timing ___ take extensive derivative positions.

• cannot; and cannot
• cannot; but can
• can; but cannot
• can; and can

The hedge ratio is often called the option's ___.

• gamma
• theta
• beta
• delta

The performance of an internationally-diversified portfolio may be affected by

• country selection.
• currency selection.
• All of the options are correct.
• stock selection.