FI335 Midterm

You sell one December futures contracts when the futures price is $1,010 per unit. Each contract is on 100 units and the initial margin per contract that you provide is $2,000. The maintenance margin per contract is $1,500. During the next day the futures price rises to $1,012 per unit. What is the balance of your margin account at the end of the day?

$1,800

A hedger takes a long position in a futures contract on a commodity on November 1, 2012 to hedge an exposure on March 1, 2013. The initial futures price is $60. On December 31, 2012 the futures price is $61. On March 1, 2013 it is $64. The contract is closed out on March 1, 2013. What gain is recognized in the accounting year January 1 to December 31, 2013? Each contract is on 1000 units of the commodity.

$4,000

A company enters into a long futures contract to buy 1,000 units of a commodity for $60 per unit. The initial margin is $6,000 and the maintenance margin is $4,000. What futures price will allow $2,000 to be withdrawn from the margin account?

62$

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?

72 cents

Which of the following is NOT true

Futures contracts nearly always last longer than forward contracts

A haircut of 20% means that

A bond with a market value of $100 is considered to be worth $80 when used to satisfy a collateral request

A company knows it will have to pay a certain amount of a foreign currency to one of its suppliers in the future. Which of the following is true

A forward contract can be used to lock in the exchange rate

Which entity in the United States takes primary responsibility for regulating futures market?

Commodities Futures Trading Commission (CFTC)

The frequency with which margin accounts are adjusted for gains and losses is

Daily

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?

Decrease by one

For a futures contract trading in April 2012, the open interest for a June 2012 contract, when compared to the open interest for Sept 2012 contracts, is usually

Higher

A limit order is

Is an order that can be executed at a specified price or one more favorable to the investor

A one-year forward contract is an agreement where

One side has the obligation to buy an asset for a certain price in one year's time.

Which of the following best describes central clearing parties

Perform a similar function to exchange clearing houses

Margin accounts have the effect of

Reducing the risk of one party regretting the deal and backing out. Ensuring funds are available to pay traders when they make a profit. Reducing systemic risk due to collapse of futures markets.

Which of the following is true about a long forward contract

The contract becomes more valuable as the price of the asset rises

Which of the following best describes the term "spot price"

The price for immediate delivery

Which of the following statements most accurately describes exchange-traded derivatives relative to over-the-counter derivatives? Exchange-traded derivatives are more likely to have:

standardized contract terms.