Liberty University BUSI 321 test 3 exam complete solutions correct answers A+ work

Liberty University BUSI 321 test 3 exam complete solutions correct answers A+ work

Question 1 ____ trade futures contracts for their own account.

Question 2 Bill Baher, a private investor, purchased a futures contract on Treasury bonds at a price of 102­12. Two months later, Baher sells the same futures contract in order to close out the position. At that time, the futures contract specifies 103­15. What is Baher's nominal profit? The par value of the futures contract is $100,000.

Question 3 The prices of stock index futures

Question 4 ____ risk is the risk of losses as a result of inadequate management or controls.

Question 5 Assume that a stock mutual fund uses stock index futures as it conducts dynamic asset allocation. This means that the mutual fund

Question 6 Marcia buys an S&P 500 futures contract with a September settlement date when the index is 1,750. By the settlement date, the S&P 500 index falls to 1,400. The return on Marcia's position in the S&P 500 futures contract is ____ percent.

Question 7 _________ take positions in financial futures to reduce their exposure to future movements in interest rates or stock prices; ________ commonly take the opposite position and thus serve as counterparties on many transactions.

Question 8 Financial futures contracts on U.S. securities are ____ by non­U.S. financial institutions.

Question 9 Put options are typically used to hedge

Question 10 If a corporation hedges payables with currency call options, it will ____ if the value of the foreign currency is ____ than the exercise price when the payables are due.

Question 11 The ____ is the most important exchange for trading options.

Question 12 Speculators may be willing to write ____ options on foreign currencies they expect to ____ against the dollar.

Question 13 Assuming the same expiration date, an option with a ____ exercise price has a ____ call option premium and a ____ put option premium.

Question 14 A ____ grants the owner the right to purchase a specified financial instrument for a specified price within a specified period of time.

Question 15 The ____, the higher the call option premium, other things being equal.

Question 16 A speculator purchases a put option for a premium of $4, with an exercise price of $30. The stock is presently priced at $29, and rises to $32 before the expiration date. What is the stock price at which the speculator would break even?

Question 17 Which of the following can normally be found in quotations for stock options provided by the financial media?

Question 18 A firm is involved in an agreement in which it makes payments in periods when a market interest rate falls below an interest rate level specified in the agreement. This means that the firm has

Question 19 A firm is involved in an agreement in which it receives payments in periods when a market interest rate falls below an interest rate level specified in the agreement. This means that the firm has

Question 20 Savings institutions participate in the swap market primarily to

Question 21 A(n) ____ swap allows the party making fixed­rate payments to terminate the swap prior to maturity.

Question 22 Interest rate ____ are interest rate derivative instruments that are normally classified separately from interest rate swaps.

Question 24 The most likely users of plain vanilla swaps would be

Question 25 Financial institutions such as U.S. savings institutions and commercial banks traditionally had fewer interest rate­sensitive ____ than ____ and therefore were adversely affected by ____ interest rates.

Question 26 Which of the following is not a reason for financial institutions to engage in interest rate swaps?

Question 27 Currency futures contracts differ from forward contracts in that they

Question 28 According to interest rate parity, if the interest rate in a foreign country is ____ than in the home country, the forward rate of the foreign country will have a ____.

Question 29 Which of the following is not a method of forecasting exchange rate volatility?

Question 30 If the spot rate of the British pound is $2, and the 180­day forward rate is $2.05, what is the annualized premium or discount?

Question 31 The devaluation of a country’s currency:

Question 32 Which of the following statements is incorrect?

Question 33 Beginning with an equilibrium situation, if European inflation suddenly ____ than U.S. inflation, this forced ____ pressure on the value of the euro.

Question 34 ____ forecasting involves the use of historical exchange rate data to predict future values.

Question 35 When a bank obtains funds through ____, households are not a common provider of the funds.

Question 36 The primary credit lending rate is determined by

Question 37 Transaction deposits do not include

Question 38 Money market deposit accounts (MMDAs)

Question 39 Banks sometimes prefer to minimize their amount of capital since

Question 40 The federal funds rate is ____ the yield on a Treasury security with a similar term remaining until maturity.

Question 41 Which of the following is most appropriate for a business that may experience a sudden need for funds but does not know precisely when?

Question 42 The interest rate banks charge their most creditworthy customers is known as the

Question 43 A bank's net interest margin will likely decline if it has a large amount of

Question 44 Which of the following is not a likely method used by a bank to reduce interest rate risk?

Question 45 If a bank expects interest rates to consistently ____ over time, it will consider allocating most of its funds to rate­____ assets.

Question 46 The risk of a loss due to closing out a transaction is referred to as ____ risk.

Question 47 Assume a bank accepts deposits on Australian dollars (A$) and makes some fixed­rate loans in British pounds. Which of the following would reduce the bank's profit margin?

Question 48 Banks can reduce their required capital levels by

Question 49 Banks can resolve cash deficiencies by

Question 50 If a bank desired to maximize its net interest margin, it would best achieve its goal by attempting to obtain most of its funds through ____ and use most of its funds for ____ (assuming that all loans will be repaid).