Question 3 Futures By using futures a firm can protect against increase in raw material prices, while continuing to benefit from price decreases. A True B False
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Question 3 Futures
By using futures a firm can protect against increase in raw material prices, while continuing to benefit from price decreases.
A True
B False
Step by step
Solved in 2 steps
- Question 2 Options In A firm can hedge the risk of upward movement in raw material prices by: A. Buying a call option. B. Selling a put option. C. Buying a put option. D. Selling a futures contractQUESTION 21 How does the presence of a convenience yield typically impact the pricing of futures contracts for a consumption asset, such as such as oil, metals, or agricultural products? O It has no effect on futures pricing. It tends to push futures prices higher It tends to push futures prices lowerQuestion 4 Futures Which of the following statements is correct? A. An option seller makes more profits than an option buyer. B. A futures seller makes more profits than a futures buyer. C. A futures buyer's profit will be equal to the futures seller's loss. D. Both futures buyer and seller makes profit.
- M3 The terms "contango" and "backwardation" are used to describe term structures of forward/futures prices (i.e., patterns of forward/futures prices of various maturities). Please explain the meanings of these two terms and the situations in which they occur (i.e., the reasons for them). Also, consider futures prices of gold. Do you expect them to be in contango or backwardation? Why?Question 17 Amacrohedge is a O hedge of a partleular assèt or lisbillty D hedge of an entire balante sheet, O heddge using optlons O hedge without basis risk, O hedge using futures on macroeconomic variables.3. Why is the initial value of a futures contract zero? a. impossible to tell b. the futures is immediately marked-to-market c. you do not pay anything for it d. the basis will converge to zero e. the expected profit is zero
- Normal vs inverted futures market What is a normal market for futures? What (a) ( does an inverted futures curve indicate? (b, ,- Is it normal or inverted? Why. i.e. does it indicate shortage of abundant supply of oil at the moment? )Consider the price quotes for oil futures below Oil future market is NORMAL /INVERTED (highlight correct, or erase wrong answer) Future curve indicate: SHORTAGE/ ABUNDANT SUPPLY of oil in the near future What would be the shape of the futures curve (c) for medical masks look like? Would it be normal or inverted? Whywhich one is correct please confirm? Q19: Using Futures contract to transfer price risk is called diversifying. hedging speculation arbitrage12 Banks use to hedge against risk through options and futures contracts in order to:* A. Reduce risk B. Manage risk C. Avoid risk D. Transfer risk
- Discuss the factors giving rise to an inverted futures market for a storable versus a non-storable commodity. What are the implications for a hedger?How can exchange-rate risk be hedged using forward, futures, and options contracts? OA. Firms can buy a put option to hedge against a rise in the exchange rate. OB. Firms can buy a call option to hedge against a rise in the exchange rate. OC. Firms can sell forward contracts to hedge against a rise in the exchange rate. OD. All of the above.Please answer both QUESTION 7 According to the capital asset pricing model (CAPM), fairly priced securities should have A. A non-zero alpha. в.A fair return based on the level of systematic risk. C. A fair return based on the level of unsystematic risk. D.A beta of 1. QUESTION 8 Diversification can increase fair return. True False
