the economics of money, banking, and financial markets

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21. 
    

    If you sold a short futures contract, you will hope that bond prices ____.
    A) rise
    B) fall
    C) are stable
    D) fluctuate
    Answer: B
    Diff: 1 Type: MC Page Ref: 327
    Skill: Applied
    Objective List: 14.1 Distinguish among forwards, futures, options, and swaps

    
    


22. 
    

    The elimination of riskless profit opportunities in the futures market is referred to as
    ____.
    A) speculation
    B) hedging
    C) arbitrage
    D) open interest
    Answer: C
    Diff: 1 Type: MC Page Ref: 327
    Skill: Recall
    Objective List: 14.1 Distinguish among forwards, futures, options, and swaps

    
    


23. 
    

    When a financial institution hedges the interest-rate risk for a specific asset, the hedge is
    called a ____.
    A) macro hedge
    B) micro hedge
    C) cross hedge
    D) futures hedge
    Answer: B
    Diff: 2 Type: MC Page Ref: 328
    Skill: Recall
    Objective List: 14.1 Distinguish among forwards, futures, options, and swaps

    
    


24. 
    

    When the financial institution is hedging interest-rate risk on its overall portfolio, then the
    hedge is a ____.
    A) macro hedge
    B) micro hedge
    C) cross hedge
    D) futures hedge
    Answer: A
    Diff: 2 Type: MC Page Ref: 328
    Skill: Recall
    Objective List: 14.1 Distinguish among forwards, futures, options, and swaps