Quiz Ch 24 – Suitability of Selling Futures Contract
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
When might selling a futures contract be suitable for an individual?
When might selling a futures contract be suitable for an individual?
True or false: The buyer’s profit in a futures contract is the initial futures price minus the eventual market price.
True or false: An offsetting futures contract can prevent delivery on a futures contract of a farmer.
True or false: When a company hedges, it essentially transfers the risk to another individual.
True or false: In a standard interest rate swap, two parties exchange fixed payments for payments linked to the interest rate level.
True or false: Mexico acquired call options to secure the price of its oil, establishing a base floor for its revenue stream.
True or false: Employing options to mitigate downside risk is referred to as a “protective put” strategy.
True or false: Through options, a company can safeguard against rising raw material prices at a cost, while still enjoying the advantages of price decreases.
True or false: Well-managed hedging has the potential to be a very profitable activity.
True or false: Commodity producers can protect their revenues by employing put options.