3. An option that can be exercised on or before its maturity is known as a(n) __

Question

3. An option that can be exercised on or before its maturity is known as a(n) _____.

Question options:

American option

barrier option

Swiss option

4.Which of the following is NOT a major problem with forward contracts?

Question options:

The market for forward contracts is illiquid as they are not easily sold to other parties.

The market is highly regulated.

One party usually has an incentive to break the agreement.

5.Ignoring borrowing costs, an investor who borrower half the funds to invest in an asset that rises from $200 to $300 makes an effective rate of return of

Question options:

30%.

100%.

300%.

To help minimize the financial crisis of 2007-2009, the government has

Question options:

lent money to replace private sector funds.

lowered interest rates.

all of the above.

7.During a housing bubble, people continue to buy houses because

Question options:

they expect house price to continue to rise.

they are able to get loans at high interest rates.

all of the above.

8.Futures contracts avoid the difficulties of forward contracts by:

Question options:

efficiently linking buyers and sellers.

controlling the price of the commodity being traded.

allowing speculators to make a profit on futures contracts.

10.The payoff for issuing an option is known as a(n) _____.

Question options:

put

premium

valuation

Subprime mortgages refer to home loans

Question options:

to high risk borrowers.

for real estate with rising prices.

at below market interest rates. all of the above.

13. Which of the following does NOT determine the premium paid by the option holder to the option issuer?

Question options:

The expiration date

The strike price

The volume of the asset traded

16.All of the following EXCEPT one would have a strong propensity to initiate a financial crisis. Which is the exception? Question options:

increases in uncertainty

increases in interest rates

exchange rate appreciation

Question 17 When the Fed bought commercial paper (short term loans to established firms) they were

Question options:

engaged in a bailout. operating as a lender of last resort. decreasing the money supply. all of the above.

Question 19 When the Treasury Department recapitalized some banks, they were Question options: engaged in a bailout.

operating as a lender of last resort.

decreasing the money supply.

Question 20

At the beginning of March 2012, Brian told Chris that he is thinking of buying some shares of Ford motors from him at the end of the month at $12/share. Chris agreed to this proposal and wrote a contract to sell shares to Brian at a price of $12/share. The current market price is $10/share. At the end of the month, the share price was $11/share, so Brian chose not to buy the shares from Chris. This is an example of:

Question options:

a forward contract.

an option.

a swap.

Explanation / Answer

American option is answer for Q3.

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.