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25 May 2018

Are the following statements consistent or inconsistent? Explain your answer and discuss how equilibrium is achieved between the futures and cash markets.

1. Futures markets serve an important function of the global financial markets by giving investors the opportunity to better manage financial risks associated with their underlying business transactions.

2. The futures market is where price discovery takes place.

3. The introduction of futures contracts creates greater price volatility for the underlying commodity or financial asset.

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Bunny Greenfelder
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25 May 2018

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Related questions

Question 1

The correlation of stock market returns between the U.S. and Japan is ____ and ____.

High, increasing.

High, decreasing.

Low, increasing.

Low, decreasing.

Low, remaining constant.

Question 5

Which of the following is not a reason given for why forecaster are so often incorrect?

There is a temptation for economic forecasters to stay fairly close to the "norm," that is, "group think."

Many analysts are simply too short-sighted.

Economists and economic forecaster often suffer from information overload.

Some economic forecasters are too broad-minded, trying to include a number of ideas in their forecasts.

None of the above (that is, all are reasons cited for why forecasters are often incorrect)

Question 6

Which of the following statements concerning asset allocation is false?

Diversification across international boundaries can improve risk-adjusted portfolio returns.

Economies expected to grow at an above-average rate with above-average profit growth should be considered as candidates to overweight in a global portfolio.

Severe currency blockages should not impact global diversification selections.

Portfolio allocation among asset classes may provide higher portfolio returns while lowering portfolio risk levels.

None of the above (that is, all statements are true).

Question 17

Defensive companies are firms where

Sales, earnings and cash flows are extremely uncertain and not necessarily related to the economy.

Sales, earnings and cash flows are likely to withstand changes caused by the economic environment.

Sales, earnings and cash flows are heavily influenced by aggregate business activity.

Sales, earnings and cash flows are growing exponentially.

None of the above.

Question 18

Speculative companies are firms where

Sales, earnings and cash flows are extremely uncertain and not necessarily related to the economy.

Sales, earnings and cash flows are likely to withstand changes caused by the economic environment.

Sales, earnings and cash flows are heavily influenced by aggregate business activity.

Sales, earnings and cash flows are growing exponentially.

None of the above.

Question 19

A firm that follows a defensive competitive strategy could

Lower production costs.

Create a strong brand image.

Use its buying power to obtain price concessions.

a and b

b and c

Question 22

A growth company can invest in projects that generate a return greater than the firm's

Return on equity.

Cost of debt.

Cost of equity.

Cost of capital.

Return on assets.

Question 33

A bond denominated in U.S. dollars and sold in Japan to Japanese investors is called a

Samurai bond.

Eurobond.

Yankee bond.

Euroyen bond

Foreign bond.

Question 43

Futures contracts are similar to forward contracts in that they both

Have volatile price movements and strong interest from buyers and sellers.

Give the holder the option to make a transaction in the future.

Have similar liquidity.

Have similar credit risk.

None of the above.

Question 46

Which of the following is not considered a "cost of carry"?

Commissions for physical storage

An opportunity cost for the net amount of invested capital

A premium for the convenience of consuming the asset now

A risk premium for uncertainty

All of the above are considered costs of carry.

Question 48

The most popular financial futures in terms of average daily volume is the

OEX contracts.

S&P 500 contracts.

LIBOR contracts.

T-bill contracts.

T-bond contracts.

Question 49

The bond that maximizes the difference between the invoice price and the delivery price is referred to as the

Cheapest-to-deliver.

Conversion bond.

Delivery bond.

Cheapest to substitute.

Cost-of-carry.

Question 50

An investor who wants a long position in a ____ must first place the order with a broker, who then passes it on to the trading pit or electronic network. Details of the order are then passed on to the exchange clearinghouse.

Call option

Put option

Forward contract

Futures contract

None of the above

Question 1

The correlation of stock market returns between the U.S. and Japan is ____ and ____.

High, increasing.

High, decreasing.

Low, increasing.

Low, decreasing.

Low, remaining constant.

Question 5

Which of the following is not a reason given for why forecaster are so often incorrect?

There is a temptation for economic forecasters to stay fairly close to the "norm," that is, "group think."

Many analysts are simply too short-sighted.

Economists and economic forecaster often suffer from information overload.

Some economic forecasters are too broad-minded, trying to include a number of ideas in their forecasts.

None of the above (that is, all are reasons cited for why forecasters are often incorrect)

Question 6

Which of the following statements concerning asset allocation is false?

Diversification across international boundaries can improve risk-adjusted portfolio returns.

Economies expected to grow at an above-average rate with above-average profit growth should be considered as candidates to overweight in a global portfolio.

Severe currency blockages should not impact global diversification selections.

Portfolio allocation among asset classes may provide higher portfolio returns while lowering portfolio risk levels.

None of the above (that is, all statements are true).

Question 17

Defensive companies are firms where

Sales, earnings and cash flows are extremely uncertain and not necessarily related to the economy.

Sales, earnings and cash flows are likely to withstand changes caused by the economic environment.

Sales, earnings and cash flows are heavily influenced by aggregate business activity.

Sales, earnings and cash flows are growing exponentially.

None of the above.

Question 18

Speculative companies are firms where

Sales, earnings and cash flows are extremely uncertain and not necessarily related to the economy.

Sales, earnings and cash flows are likely to withstand changes caused by the economic environment.

Sales, earnings and cash flows are heavily influenced by aggregate business activity.

Sales, earnings and cash flows are growing exponentially.

None of the above.

Question 19

A firm that follows a defensive competitive strategy could

Lower production costs.

Create a strong brand image.

Use its buying power to obtain price concessions.

a and b

b and c

Question 22

A growth company can invest in projects that generate a return greater than the firm's

Return on equity.

Cost of debt.

Cost of equity.

Cost of capital.

Return on assets.

Question 33

A bond denominated in U.S. dollars and sold in Japan to Japanese investors is called a

Samurai bond.

Eurobond.

Yankee bond.

Euroyen bond

Foreign bond.

Question 43

Futures contracts are similar to forward contracts in that they both

Have volatile price movements and strong interest from buyers and sellers.

Give the holder the option to make a transaction in the future.

Have similar liquidity.

Have similar credit risk.

None of the above.

Question 46

Which of the following is not considered a "cost of carry"?

Commissions for physical storage

An opportunity cost for the net amount of invested capital

A premium for the convenience of consuming the asset now

A risk premium for uncertainty

All of the above are considered costs of carry.

Question 48

The most popular financial futures in terms of average daily volume is the

OEX contracts.

S&P 500 contracts.

LIBOR contracts.

T-bill contracts.

T-bond contracts.

Question 49

The bond that maximizes the difference between the invoice price and the delivery price is referred to as the

Cheapest-to-deliver.

Conversion bond.

Delivery bond.

Cheapest to substitute.

Cost-of-carry.

Question 50

An investor who wants a long position in a ____ must first place the order with a broker, who then passes it on to the trading pit or electronic network. Details of the order are then passed on to the exchange clearinghouse.

Call option

Put option

Forward contract

Futures contract

None of the above

Question 1

The correlation of stock market returns between the U.S. and Japan is ____ and ____.

High, increasing.

High, decreasing.

Low, increasing.

Low, decreasing.

Low, remaining constant.

Question 5

Which of the following is not a reason given for why forecaster are so often incorrect?

There is a temptation for economic forecasters to stay fairly close to the "norm," that is, "group think."

Many analysts are simply too short-sighted.

Economists and economic forecaster often suffer from information overload.

Some economic forecasters are too broad-minded, trying to include a number of ideas in their forecasts.

None of the above (that is, all are reasons cited for why forecasters are often incorrect)

Question 6

Which of the following statements concerning asset allocation is false?

Diversification across international boundaries can improve risk-adjusted portfolio returns.

Economies expected to grow at an above-average rate with above-average profit growth should be considered as candidates to overweight in a global portfolio.

Severe currency blockages should not impact global diversification selections.

Portfolio allocation among asset classes may provide higher portfolio returns while lowering portfolio risk levels.

None of the above (that is, all statements are true).

Question 17

Defensive companies are firms where

Sales, earnings and cash flows are extremely uncertain and not necessarily related to the economy.

Sales, earnings and cash flows are likely to withstand changes caused by the economic environment.

Sales, earnings and cash flows are heavily influenced by aggregate business activity.

Sales, earnings and cash flows are growing exponentially.

None of the above.

Question 18

Speculative companies are firms where

Sales, earnings and cash flows are extremely uncertain and not necessarily related to the economy.

Sales, earnings and cash flows are likely to withstand changes caused by the economic environment.

Sales, earnings and cash flows are heavily influenced by aggregate business activity.

Sales, earnings and cash flows are growing exponentially.

None of the above.

Question 19

A firm that follows a defensive competitive strategy could

Lower production costs.

Create a strong brand image.

Use its buying power to obtain price concessions.

a and b

b and c

Question 22

A growth company can invest in projects that generate a return greater than the firm's

Return on equity.

Cost of debt.

Cost of equity.

Cost of capital.

Return on assets.

Question 33

A bond denominated in U.S. dollars and sold in Japan to Japanese investors is called a

Samurai bond.

Eurobond.

Yankee bond.

Euroyen bond

Foreign bond.

Question 43

Futures contracts are similar to forward contracts in that they both

Have volatile price movements and strong interest from buyers and sellers.

Give the holder the option to make a transaction in the future.

Have similar liquidity.

Have similar credit risk.

None of the above.

Question 46

Which of the following is not considered a "cost of carry"?

Commissions for physical storage

An opportunity cost for the net amount of invested capital

A premium for the convenience of consuming the asset now

A risk premium for uncertainty

All of the above are considered costs of carry.

Question 48

The most popular financial futures in terms of average daily volume is the

OEX contracts.

S&P 500 contracts.

LIBOR contracts.

T-bill contracts.

T-bond contracts.

Question 49

The bond that maximizes the difference between the invoice price and the delivery price is referred to as the

Cheapest-to-deliver.

Conversion bond.

Delivery bond.

Cheapest to substitute.

Cost-of-carry.

Question 50

An investor who wants a long position in a ____ must first place the order with a broker, who then passes it on to the trading pit or electronic network. Details of the order are then passed on to the exchange clearinghouse.

Call option

Put option

Forward contract

Futures contract

None of the above

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