
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
Determine which of the following is NOT a distinguishing characteristic of futures contracts, relative to forward contracts. Question *
A. Contracts are settled daily, and marked-to-market.
B. Contracts are more liquid, as one can offset an obligation by taking the opposite position.
C. Contracts are more customized to suit the buyer’s needs.
D. Contracts are structured to minimize the effects of credit risk.
E. Contracts have price limits, beyond which trading may be temporarily halted.
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- Which derivative does not reduce financial risk?a. optionsb. swapsc. futuresd.forwardse. answer not givenarrow_forwardExchanges are different than Over the counter markets because on exchanges A. Futures contracts are standardized B. All of the Above C. Futures require margin D. Futures are traded on an exchanges that cleararrow_forwardWith regard to interest rate sensitivity measures and bonds: Group of answer choices C. Convexity attempts to capture the sensitivity of a bond’s duration to changes in interest rates. D. Both B & C B. Duration is related to yield approximation and convexity is related to price. A. Convexity is related to yield approximation and duration is related to pricearrow_forward
- D4)arrow_forwardWhen market rates of interest rise after a fixed-rate security is purchased, the value of the now-below-market, fixed-interest payments declines, so the market value of the investment falls. How would that drop in fair value be reflected in the investment account for a security classified as HTM? Would your answer change if the drop in fair value was due to worsened financial conditions at the investee?arrow_forwardWhat is the correct strategy when the asset backing the futures contract differs from the asset whose price is being hedged? O Short hedge O Long hedge O Perfect hedge O Tailing the hedge O Cross hedgearrow_forward
- The daily settlement of obligations on futures positions is called _____________. Group of answer choices initial margin requirement a margin call a variation margin check marking to marketarrow_forwardOrganized exchanges offer important advantages like (a) mitigating credit risk and (b) providing liquidity. But they have the following market imperfections: 1. Open interest in futures contracts declines for longer maturities; so, for liquidity reasons, you may be unable to hedge longer deliveries using longer maturity futures contracts. Explain briefly how you would overcome these market imperfections.arrow_forward
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