A characteristic of stock index futures is

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Reference no: EM13515831

Multiple Choice

1.A characteristic of stock index futures is

a.they have limited risk.

b.they pay dividends monthly.

c.they are settled in cash.

d.they have a beta of zero.

2.If a stock index is 400.00, how many associated futures contracts (multiplier of $250) must be sold to hedge a $10 million stock portfolio with a beta of 1.10?

a.50

b.55

c.110

d.150

3.Which of the following statements is true regarding a stock index futures contract?

a.The basis is usually negative.

b.The basis will converge on zero as time passes.

c.The basis will only decrease; it cannot increase.

d.The basis will only increase; it cannot decrease.

4.Dynamic hedging strategies seek to

a.replicate a put option.

b.replicate a call option.

c.replicate a covered call option.

d.replicate a short put.

5.  The price of a stock index futures contract is a function of all of the following except

a.dividend yield.

b.interest rates.

c.level of the index.

d.future volatility of the index

6.  A synthetic index portfolio is _____ T-bills and _____ stock index futures.

a.long, long

b.long, short

c.short, long

d.short, short

7.  A person buys S&P 500 futures and sells Dow Jones futures.  This is an example of a(n) _____ spread.

a.bull

b.time

c.intermarket

d.credit

8.Stock index futures are used to reduce all of the following except

a.systematic risk.

b.market risk.

c.undiversifiable risk.

d.company risk.

9.A futures contract hedge ratio depends on all of the following except

a.value of the futures contract.

b.dollar value of the portfolio to be hedged.

c.beta of the portfolio to be hedged.

d.premium on the futures contract.

Reference no: EM13515831

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