Quick Quiz 2

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1		Derivative securities are __________.
			A)	assets that reduce exposure to price or rate fluctuations
			B)	assets used to reduce long-term financial risk due to fundamental changes in the economy
			C)	assets that reduce short-run financial exposure due to uncertain prices or interest rates
			D)	financial assets that represent a claim on other assets
			E)	securities which eliminate the risk associated with price changes
2		Economic exposure __________.
			A)	is also known as reducing the exposure to price or rate fluctuations
			B)	can be eliminated using financial assets that represent a claim on other assets
			C)	is short-run financial exposure due to uncertain prices or interest rates
			D)	is long-term financial risk due to fundamental changes in the economy
			E)	is exposure to short-term changes in inflation
3		Which of the following contracts obliges the writer to sell an asset for a specified price if the contract is exercised?
			A)	A put option
			B)	A call option
			C)	A forward contract
			D)	A futures contract
			E)	A swap contract
4		The __________ of a __________ has the right, but not the obligation, to sell an asset on or before a specified date for a specified price.
			A)	buyer; put option
			B)	buyer; call option
			C)	seller; forward contract
			D)	seller; call option
			E)	seller; put option
5		The short-term financial risk arising from the need to buy or sell at uncertain prices or rates in the near future is called __________ exposure.
			A)	economic
			B)	ancillary
			C)	long-term
			D)	transactions
			E)	commodity
6		Which of the following do(es) not obligate both of the contracting parties to transact in the future? I. Futures contracts. II. Futures option contracts. III. Swap contracts. IV. Forward contracts.
			A)	I only.
			B)	II only.
			C)	III only.
			D)	II and IV only.
			E)	III and IV only.

Use the following information to answer the next three questions.
Suppose you observed the following quotations at the end of business on May 12, 2001.

Orange Juice (CTN) 15,000lbs.; cents per lb.
Mth	Open	High	Low	Settle	Change	Lifetime High	Lifetime Low	Open Interest
Jul01	74.90	82.30	74.90	82.20	+6.80	128.50	73.00	17,832
Sep01	77.50	83.00	77.50	83.00	+5.00	121.30	77.10	6,379
Nov01	80.50	85.75	80.50	85.75	+5.00	113.25	79.80	3,149
Jan02	83.50	88.00	83.00	88.50	+5.00	119.75	82.75	1,397

7		What was the highest price at which a November orange juice futures contract traded over its lifetime?
			A)	$12,075
			B)	$12,863
			C)	$15,642
			D)	$16,988
			E)	$17,963
8		For the purposes of marking to market, the current price of orange juice for January delivery is __________.
			A)	$12,438
			B)	$12,450
			C)	$13,780
			D)	$13,200
			E)	$13,275
9		How many orange juice futures contracts for delivery in the current year ONLY were outstanding at the end of the trading day?
			A)	3,149
			B)	6,379
			C)	17,832
			D)	27,360
			E)	28,757
10		You think the price of GM stock is going to fall. In order to make money, you could __________. I. buy a call option on GM stock. II. sell a call option on GM stock. III. buy a put option on GM stock. IV. sell a put option on GM stock. V. buy shares of GM stock.
			A)	I and IV only.
			B)	II and III only.
			C)	I, IV, and V only.
			D)	II, III, and V only.
			E)	V only.