1. A deep in-the-money call option on futures is exercised early because??.a. the intrinsic value is maximizedb. it behaves like a futures but ties up fundsc. the futures price is not likely to rise any furtherd. all of the abovee. none of the above2 .The transaction designed to exploit mis-pricing in the relationship between futures and spot prices is calleda. a repurchase agreement??.b. a hedgec. speculationd. carry arbitragee. none of the above3. The implied repo rate is similar to thea. internal rate of returnb. cost of hedgingc. yield on the futures contractd. all of the abovee. none of the above??.4. On the basis of liquidity, the best futures contract for hedging short-term interest rates isAnswera. Treasury billsb. the prime ratec. commercial paperd. Eurodollarse. none of the above5. Which one of the following options is not associated with the Treasury bond futures contract?Answera. end-of-the-month??.b. spread optionc. wild card optiond. quality optione. none of the above6 .The transaction in which a Treasury bond futures spread is combined with a Fed funds futures transaction is called aAnswera. Bond-bill spreadb. MOB spread??.c. designated order turnaroundd. turtle tradee. none of the above7. The transaction in which money is borrowed by selling a security and promising to buy it back in several weeks is called aAnswera. term repob. overnight repoc. term arbitraged. MOB spread??.e. none of the above8. The end-of-the-month option isAnswera. the right to exercise an option on the last day of the monthb. an option expiring on the last day of the monthc. the right to deliver during the last seven business days of the monthd. an option that trades only at the end of the monthe. none of the above9. In which of the following situations would you use a short hedge?Answera. the planned purchase of a stock??.b. the planned purchase of commercial paperc. the planned issuance of bondsd. the planned repurchase of stock to cover a short positione. none of the above10. Derivatives activities in end users are primarily conducted byAnswera. the human resources groupb. the sales staffc. the chief financial officerd. the board of directorse. the treasury group11. The cost of carry consists of all the following exceptAnswer??.a. the risk-free rateb. the cost of storagec. insurance on the assetd. the risk premiume. none of the above??.
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