International Financial Management by Cheol Eun 8th Edition – Test Bank

International Financial Management, 8e (Eun)
Chapter 7: Futures and Choices in the Global Trade

1) A put choice on $15,000 with a strike price of €10,000 is similar to a call option on €10,000 with a strike price of $15,000.

2) A CME contract on €125,000 with September delivery:
A) Represents a futures contract.

3) If you entered into a futures contract to purchase €62,500 at $1.50 per € and the futures price closes at $1.46 today, your profit/loss would be:
C) You have lost $2,500.00.

4) In relation to the futures market, a “speculator”:
A) Aims to profit from changes in futures prices.

5) When comparing “forward” and “futures” trade contracts:
B) The key difference lies in how the underlying asset is priced for future transactions.

6) Comparing “forward” and “futures” trade contracts, it can be noted that:
D) Delivery of the underlying asset is seldom made in futures contracts and is often made in forward contracts.

7) A clearinghouse acts as a third party to all transactions in which market?
A) Futures

8) In the event of a default on one side of a futures trade:
D) The clearing member stands in for the defaulting party and may seek restitution.

9) If you entered into a futures contract to buy €62,500 at $1.50 per € with an initial performance bond of $1,500 and maintenance level of $500, you would need to post additional funds at what settle price?
A) $1.5160 per €.

10) If you entered into a futures contract to sell €75,000 at $1.79 per € with an initial performance bond of $1,500 and maintenance level of $500, you would need to post additional funds at what settle price?
A) $1.7767 per €.

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