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If you sell in April a stock index future contract on the S&P 500 index at the price of 1050
points that matures on June 30 of the same year and on the maturity date the S&P 500 Index is at
1047, you have a ____ of $____.
A) loss; 750
B) loss; 3
C) profit; 750
D) profit; 3
Answer: C
Diff: 2 Type: MC Page Ref: 333 - 334
Skill: Applied
Objective List: 14.1 Distinguish among forwards, futures, options, and swaps
The risk that occurs because stock prices fluctuate is called ____.
A) stock market risk
B) reinvestment risk
C) interest rate risk
D) default risk
Answer: A
Diff: 1 Type: MC Page Ref: 333
Skill: Recall
Objective List: 14.1 Distinguish among forwards, futures, options, and swaps
Who would be most likely to buy a long stock index future?
A) A mutual fund manager who believes the market will rise
B) A mutual fund manager who believes the market will fall
C) A mutual fund manager who believes the market will be stable
D) A mutual fund manager who does not believe in hedging
Answer: A
Diff: 2 Type: MC Page Ref: 333 - 334
Skill: Applied
Objective List: 14.1 Distinguish among forwards, futures, options, and swaps
If you buy a futures contract on the S&P 500 Index at a price of 450 and the index rises to
500, you will ____.
A) lose $12,500
B) gain $12,50 0
C) lose $50
D) gain $50
Answer: B
Diff: 2 Type: MC Page Ref: 333 - 334
Skill: Applied
Objective List: 14.1 Distinguish among forwards, futures, options, and swaps