BANKING 302 – Which of the following is considered to be a derivative

Question 1 (1 point) Which of the following is considered to be a derivative?Question 1 options:BondsMutual fundsSwapsEquitiesQuestion 2 (1 point) A stock market bubble can start due toQuestion 2 options:low interest rates.high expected dividends.high levels of lending.all of the above.Question 3 (1 point) An option that can be exercised on or before its maturity is known as a(n) _____.Question 3 options:American optionbarrier optionEuropean optionSwiss optionQuestion 4 (1 point) Which of the following is NOT a major problem with forward contracts?Question 4 options:It is often costly/difficult to find a willing counterparty.The market for forward contracts is illiquid as they are not easily sold to other parties.The market is highly regulated. One party usually has an incentive to break the agreement.Question 5 (1 point) Ignoring borrowing costs, an investor who borrower half the funds to invest in an asset that rises from $200 to $300 makes an effective rate of return ofQuestion 5 options:30%.50%.100%.300%.Question 6 (1 point) To help minimize the financial crisis of 2007-2009, the government hasQuestion 6 options:lent money to replace private sector funds.bailed out failing financial institutions.lowered interest rates.all of the above.Question 7 (1 point During a housing bubble, people continue to buy houses becauseQuestion 7 options:they expect house price to continue to rise.they are able to get loans at high interest rates.the government guarantees house value won_t fall.all of the above.Question 8 (1 point) Futures contracts avoid the difficulties of forward contracts by:Question 8 options:efficiently linking buyers and sellers.controlling the price of the commodity being traded.allowing speculators to make a profit on futures contracts.covering any losses incurred by buyers and sellers on the contract.Question 9 (1 point) Lenders of last resort intend toQuestion 9 options:add liquidity to financial markets.restore confidence in financial markets. lower interest rates.all of the above.The payoff for issuing an option is known as a(n) _____.Question 10 options:putcallpremiumvaluationQuestion 11 (1 point)Bailouts are intended toQuestion 11 options:increase the capital in financial institutions.restore confidence in financial markets.prevent insolvencies.all of the above.SaveQuestion 12 (1 point)Subprime mortgages refer to home loansQuestion 12 options:to high risk borrowers.for real estate with rising prices.at below market interest rates.all of the above.SaveQuestion 13 (1 point)Which of the following does NOT determine the premium paid by the option holder to the option issuer?Question 13 options:Interest ratesThe expiration dateThe strike priceThe volume of the asset tradedSaveQuestion 14 (1 point)Which government action involves putting taxpayer money at risk?Question 14 options:lowering interest ratesbailoutlender of last resortnone of the aboveSaveQuestion 15 (1 point)In order to prevent traders from reneging on futures contracts, exchanges require traders to maintain _____.Question 15 options:micro accountssavings accountscredit accountsmargin accountsSaveQuestion 16 (1 point)All of the following EXCEPT one would have a strong propensity to initiate a financial crisis. Which is the exception?Question 16 options:increases in uncertaintyincreases in interest ratesbalance sheet deteriorationexchange rate appreciationSaveQuestion 17 (1 point)When the Fed bought commercial paper (short term loans to established firms) they wereQuestion 17 options:engaged in a bailout.operating as a lender of last resort.decreasing the money supply.all of the above.SaveQuestion 18 (1 point)A farmer and a sugar factory enter into a futures contract requiring the delivery of 4,000 tons of sugarcane to the buyer in June at a price of $30 per ton. Suppose the futures contracts for sugarcane increases to $35 per bushel the day after the farmer and the sugar factory enter into their futures contract. If the contract was settled under these conditions, the farmer will have:Question 18 options:lost $5.lost $20,000.gained $5.gained $20,000.SaveQuestion 19 (1 point)When the Treasury Department recapitalized some banks, they wereQuestion 19 options:engaged in a bailout.operating as a lender of last resort.decreasing the money supply.all of the above.SaveQuestion 20 (1 point)At the beginning of March 2012, Brian told Chris that he is thinking of buying some shares of Ford motors from him at the end of the month at $12/share. Chris agreed to this proposal and wrote a contract to sell shares to Brian at a price of $12/share. The current market price is $10/share. At the end of the month, the share price was $11/share, so Brian chose not to buy the shares from Chris. This is an example of:Question 20 options:a forward contract.an option.a future contract.a swap.