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Futures Contract and Bank

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Futures Contract and Bank
Multiple choice type questions for Financial Instruments and Markets
As requested, below are questions from my "data base" of multiple choice type questions. I do not expect to be able to put the answers on the web before your final exam. I do not have a "data base" of the answers to these questions.
Some of these questions are on material that was on the first exam and other questions are on material that I covered last year but did not cover this year (such as margin, selling stock short). But since some students requested this "data base", it is here, if you find it useful.

Multiple Choice
1. Multiple Choice (____ points; each multiple choice question is worth ___ points) Circle the correct answer. If you change your answer, indicate the new choice to the left of the question and circle it.
1. Federal Funds are typically:
a. Loan from a dealer that is collateralized by Treasury securities.
b. Federal Reserve assets
c. Loans from the Federal Reserve to banks
d. Loans from banks to their “best” commercial customers
e. Overnight loans settled in immediately available funds

2. Eurodollars are best associated with:
a. The use of dollar currency ($100 bills) in less developed countries in Europe
b. The financing of Europeans by domestic US banks
c. The transfer of ownership of a domestic US bank deposit from a US company to a foreign based owner
d. The development of a common currency in Europe.

3. A hedger in the futures market hedges to prevent a loss in a business transaction, but also gives up:
a. A sizable fee to the exchange
b. The loss on the futures contract
c. The opportunity to gain from a favorable turn in prices of the item
d. The potential gain on the futures contract.

4. All the following are risks associated with futures contracts except: not good question
a. Margin risk
b. Basis risk
c. Price risk
d. Manipulation risk

5. What action would the holder of a maturing (expiring) call option take with an

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