FIN 402 C1 (TB)

7) What is the cost of 100 shares of Jiffy, Inc. stock given that the bid-ask prices are $31.25 - $32.00 and a $15.00 commission per transaction exists? A) $3215 B) $3140 C) $3125 D) $3200

A) $3215

5) All of the following are financially engineered products, except: A) Mortgage B) Mortgage backed security C) Interest only D) Principal only

A) Mortgage

2) Who from the following list would be considered a speculator by entering into a futures or options contract on commodities? A) Farmer B) Corn delivery truck driver C) Food manufacturer D) None of the above

B) Corn delivery truck driver

13) A firm provides a service that benefits from decreasing employment. This firm has a risk exposure to macro event. All other variables being equal, which of the following derivative securities is the firm most likely use to hedge its exposure? A) Short position in an economic futures B) Long position in an economic futures C) Short position in an interest rate futures D) Long position in an interest rate futures

B) Long position in an economic futures

4) During the growing season, a corn farmer sells short corn futures contracts in an amount equal to her crop. If upon harvesting and selling her crop she maintains the contracts, she is then considered a(n): A) Hedger B) Speculator C) Arbitrager D) None of the above

B) Speculator

9) Assume that you open a 100-share short position in Jiffy, Inc. common stock at the bid-ask price of $32.00 - $32.50. When you close your position, the bid-ask prices are $32.50 - $33.00. If you pay a commission rate of 0.5%, what is your profit or loss on the short investment? A) $32.50 gain B) $16.25 loss C) $132.50 loss D) $100.00 gain

C) $132.50 loss

1) Which of the following is not a derivative instrument? A) Contract to sell corn B) Option agreement to buy land C) Installment sales agreement D) Mortgage backed security

C) Installment sales agreement

12) According to trading volume data tabulated by the Wall Street Journal for April 15, 2010, which index futures contact experienced the highest total open interest? A) DJ Industrial Average B) S&P 500 Index C) Mini S&P 500 D) Mini Nasdaq 100

C) Mini S&P 500

3) A mutual fund is engaged in the short term and temporary purchase of index futures, for purposes of minimizing its cash exposures. Which "use" most closely explains their actions? A) Risk management B) Speculation C) Reduced transaction costs D) Regulatory arbitrage

C) Reduced transaction costs

8) Assume that you purchase 100 shares of Jiffy, Inc. common stock at the bid-ask prices of $32.00 - $32.50. When you sell, the bid-ask prices are $32.50 - $33.00. If you pay a commission rate of 0.5%, what is your profit or loss? A) $0 B) $16.25 loss C) $32.50 gain D) $32.50 loss

D) $32.50 loss

6) Select the family member who is offering the most diversification to the rest of the family. A) Dad works for General Motors B) Mom works for Goodyear C) Daughter works for Jiffy Lube D) Son works for Eli Lilly & Company

D) Son works for Eli Lilly & Company