Quiz Ch 26 – Seller’s Obligation in Forward Contracts
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
What commitment does the seller make in a forward contract?
What commitment does the seller make in a forward contract?
True or false: The daily “mark to market” process involves the calculation of profits or losses resulting in adjustments to the trader’s margin account.
True or false: The formula for commodity futures involves the calculation of (Futures Price) × (1 + rf)^t, representing the difference between the spot price and the net convenience yield.
True or false: The convenience yield represents the intrinsic advantage derived from holding the physical commodity rather than a financial claim in commodity futures.
True or false: The calculation for futures price involves (Spot Price)/(1 + rf – y)^t in financial futures.
True or false: The hedge ratio or delta serves as a measure of how the value of one asset responds to changes in the value of another.
True or false: Administrative costs, adverse selection, and moral hazard pose challenges for insurance companies when bearing risk.
True or false: When requested to quote a rate for a one-year loan one year from today, with current interest rates at 7 percent for one year and 8 percent for two years, a bank might consider quoting 9 percent.
What is the term for a standardized forward contract when it is traded on an exchange?
What assets could serve as the underlying asset(s) in a “total return swap”?