Question

13. The value of a derivative is determined by:

a. the Federal Reserve. b. SEC regulation. c. the value of the underlying asset. d. the risk-free rate.

14. In a futures transaction:

a. the dollar amount of the transaction increases as the contract date approaches. b. the risk is less than if actually purchasing the underlying asset. c. what one person gains is what the other person loses. d. an investor can hedge risk only in the commodities and interest rates.

15. The long position in a futures contract is the party that will:

a. benefit from decreases in the price of the underlying asset. b. agree to make delivery of a commodity or financial instrument at a future date. c. benefit from increases in the price of the underlying asset. d. accept the greater share of the risk.

Answer 1

13.

c. the value of the underlying asset.

14.

c. what one person gains is what the other person loses.

15.

c. benefit from increases in the price of the underlying asset.