Series 66 - Unit 4 Checkpoint Exam - Derivaties

A commodities speculator purchases a 1,000 bushel wheat futures contract at $0.50 per bushel. At expiration, the settlement price is $0.45 per bushel. This individual A) has a $50 loss B) effectively hedged the long wheat position C) has a $50 gain D) must make delivery of the wheat

A

The term used to describe investment vehicles whose value is based on the underlying asset is A) derivative B) separate account C) funded debt D) parity

A

An investor who was sure that a stock's price was going to move substantially but wasn't sure in which direction would be able to benefit by A) selling the stock short and purchasing a call on the stock B) purchasing a straddle on that stock C) purchasing the stock and a put on the stock D) writing a straddle on that stock

B

Many investors with a long position in common stock employ the technique of writing call options on the underlying stock for the purpose of A) protecting the premium B) generating income C) participating in the growth of the company D) increasing dividend return

B

Which of the following is not trades on any exchange? A) Futures contracts B) Foward contracts C) closed-end funds D) ETFs

B

Which of the following statements is most accurate when describing equity straddle options? I. The option buyer is looking for market volatility II. The option buyer is looking for market stability III. The option seller is looking for market volatility IV. The option seller is looking for market stability. A) I and III B) I and IV C) II and III D) II and IV

B

Exercise of which of the following would not result in a change in the issuer's balance sheet? A) Rights B) Warrants C) call options D) Convertible preferred stock

C

In general , the value of a derivative is primarily determined by which of the following... I. The price volatility of the underlying asset II. The exchange on which it is traded III. The length of time until the contract expires IV. Whether it is purchased from a broker or dealer A) II and III B) I and II C) I and III D) III and IV

C

One of the privileges frequently offered to holders of common stock is A) put options B) warrants C) preemptive rights D) call options

C

The term sweetener would most often apply to A) derivatives B) convertibles C) warrants D) rights

C

You have a client who has sold short 100 shares of RIF, a stock listed on the NYSE. If the client wishes to use options to protect against unlimited loss, you suggest the client. A) buy 1 RIF put B) sell 1 RIF call C) buy 1 RIF call D) sell 1 RIF put

C

Buying a put option on a security one currently owns allows an investor A) increase his profit if the security declines in price B) receive the premium for the purchase of the put C) buy more stock if he exercises the put D) participate in additional gains if the security continues to increase in price

D

Options positions can create either rights or obligations. In which option position has the investor created the possible obligation to purchase the stock? A) Purchasing the put B) Purchasing a Call C) Selling a Call D) Selling a Put

D

Which of the following statements is true? A) A futures contract does not involve obligations to buy or sell an asset B) Unlike forwards, futures are not traded on an exchange C) Futures contract always requires delivery of an asset D) A futures contract has standardized terms

D