Fundamentals of Futures and Options Markets, 8e (Hull)
1) A one-year forward contract is an agreement where
A) One side has the right to buy an asset for a certain price in one year's time
B) One side has the obligation to buy an asset for a certain price in one year's time
C) One side has the obligation to buy an asset for a certain price at some time during the next year D) One side has the obligation to buy an asset for the market price in one year's time
2) Which of the following is NOT true?
A) When a CBOE call option on IBM is exercised, IBM issues more stock
B) An American option can be exercised at any time during its life
C) An call option will always be exercised at maturity if …show more content…
A) Futures contracts nearly always last longer than forward contracts
B) Futures contracts are standardized; forward contracts are not
C) Delivery or final cash settlement usually takes place with forward contracts; the same is not true of futures contracts
D) Forward contracts usually have one specified delivery date; futures contract often have a range of delivery dates
2) In the corn futures contract a number of different types of corn can be delivered (with price adjustments specified by the exchange) and there are a number of different delivery locations.
Which of the following is true?
A) This flexibility tends increase the futures price
B) This flexibility tends decrease the futures price
C) This flexibility may increase and may decrease the futures price
D) This flexibility has no effect on the futures price
3) A company enters into a short futures contract to sell 50,000 units of a commodity for 70 cents per unit. The initial margin is $4,000 and the maintenance margin is $3,000. What is the futures price per unit above which there will be a margin call?
A) 78 cents
B) 76 cents
C) 74 cents
D) 72 cents
4) One futures contract is traded where both the long and short parties are closing out existing positions. What is the resultant change in the open interest?
A) No change
B) Decrease by one
C) Decrease by two
D) Increase by one
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Futures are a contract or legal agreement, where an investor agrees to purchase a certain amount of a physical good or financial asset on a specific date for a set price.
v. This is applicable to our case because the negotiation and contract signing payments can be considered arrangement considerations because the payments are fixed and therefore, should be allocated over the three
2. Chen, a retail seller of fruit, entered into a contract for the purchase of 10 bushels of peaches from Georgina, at a price of $5 per bushel. Delivery was to be in one month. One week after this contract was formed, unexpected cold weather destroyed most of the peach crop and prices doubled. Georgina asked Chen if he would agree to a price increase to $7 per bushel,
c. The amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed.
(A) if such contract or interest therein has a basis for determining gain or loss in the hands of a transferee determined in whole or in part by reference to such basis of such contract or interest therein in the hands of the transferor,
Younger L.J: in all cases the obligation must, “be such as, in view of the surrounding circumstances, was within the reasonable contemplation of the parties at the time when the transaction was entered into, and was at that time within the grantor’s power to fulfil.”
Contracts Exam Question (with sample answers) Question 1 H. Bigbus (B hereafter) operates a construction supply business in Harrisburg. B specializes in supplying difficult-to-locate plumbing and light fixtures for contractors who do remodeling work. B sent the following letter to five contractors in the Harrisburg region: OFFER TO THE TRADE We have cornered the market for a source of brass "Orient Express" wall hanging light fixtures. We know (and we're sure that you do, too) that these fixtures are in such great demand that they are nearly impossible to obtain. If you are willing to take all your needs from us, we'll guarantee delivery at $20.00 each. I. M. Sap (S hereafter), a contractor who remodeled about twenty houses per year,
According to Goel and Gutierrez, they investigated that fluctuating procurement price is one of the causes of inventory risk and through trading appropriate numbers of futures or forward commodity contracts reduces inventory related costs for effective hedging. Hedging and the price discovery functions of futures markets facilitates not only a better inventory management but enhances the efficiency of marketing operations, production and storage.