Premium Essay

Profolio

In: Other Topics

Submitted By sfmz
Words 496
Pages 2
T Derivatives are products that enable the management of risks associated with interest rates, exchange rates, stock prices and commodity prices.
2. F A futures contract is a derivative product that is traded over-the-counter with a financial institution.
3. T A financial futures contract allows a hedger to create a situation where any change in the physical market price of a financial instrument is mostly offset by a profit, or loss, derived from the futures market transactions.
4. T A limit order is one in which a client instructs the broker to buy a specific contract only up to a specified price or to sell a specified contract down to a specified price.
5. T An opening position in the futures market requires an initial margin to be lodged with the futures exchange clearing-house.
6. F Margin calls are normally made once a week, since all contracts are marked-to-market at the end of each week.
7. T A client with a long position in a 90-day bank-accepted bill futures contract would experience a reduction in the balance of their margin account if the price of the contract fell from 92.50 to 91.50.
8. F If an investor has a long position in three-year Treasury bond futures contracts, on the delivery date the investor must deliver the specified Treasury bonds to ASX Trade 24.
9. T A borrower with a short position in an interest rate futures contract can close-out the futures position by establishing a long position in the same contract with the same delivery date as the original contract.
10. F The main participants in the futures markets are parties that hedge a risk exposure associated with an underlying physical market product. As such, speculators do not participate in the futures market.
13. T A share portfolio manager is to use futures contracts to hedge the value of a diversified share portfolio against a fall in share prices. The manager will sell

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