the economics of money, banking, and financial markets

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8. 
   

   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

   
   


9. 
   

   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

   
   


10. 
    

    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

    
    


11. 
    

    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