fin 385 ch-13

Question 11 pts

A financial institution that maintains some Treasury bond holdings sells Treasury bond futures contracts. If interest rates increase, the market value of the bond holdings will ____ and the position in futures contracts will result in a ____.

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Question 21 pts

The basis is the

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Question 31 pts

The value of an S&P 500 futures contract is $500 times the index. Assume the futures price on the S&P 500 index is 1612 at the time of purchase. If the index price is 1619 when the position is closed out, the gain is

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Question 41 pts

____ take positions in futures to reduce their exposure to future movements in interest rates or stock prices.

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Question 51 pts

____ risk is the risk of losses as a result of inadequate management or controls.

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Question 61 pts

An unexpected ____ in the consumer price index tends to create expectations of ____ interest rates and places ____ pressure on Treasury bond futures prices.

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Question 71 ptsSkip to question text.

Clarke Bank plans to satisfy cash needs in nine months by selling its Treasury bond holdings for $4 million. However, Clarke is concerned that interest rates might increase over the next three months. To hedge against this possibility, Clarke plans to sell Treasury bond futures. Thus, Clarke sells ____ futures contract for a price of 99-12. Assuming that the actual price of the futures contract declined to 97-20, Clarke would make a ____ of $____ from closing out the futures position.

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Question 81 pts

If the prices of Treasury bonds ____, the value of an existing Treasury bond futures contract should ____.

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Question 91 pts

If speculators believe interest rates will ____, they would consider ____ a T-bill futures contract today.

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Question 101 ptsSkip to question text.

Assume that speculators had purchased a futures contract at the beginning of the year. If the price of a security represented by a futures contract ____ over the year, then these speculators would likely have purchased the futures contract for ____ than they can sell it for.