Stock Institutions and Financial Markets Test

Question 1

The various types of markets where derivatives are traded include

Accepted Answer

Derivative securities markets

Answer

Cash flow backed markets

Answer

Mortgage backed markets

Answer

Assets backed market

Question 2

When purchasing a put option, the likelihood that the buyer will experience a loss rises as

Accepted Answer

A rise in the stock price

Answer

Falling stock price

Answer

Lengthening of the maturity period

Answer

A shorter maturity period

Question 3

To determine ____, the cost of an option is deducted from its time value.

Accepted Answer

Intrinsic value

Answer

Market index

Answer

Extrinsic value

Answer

Book value index

Question 4

The kind of swaps in which two counterparties trade fixed interest payments for floating payments

Accepted Answer

Interest rate swaps

Answer

Indexed swaps

Answer

Counter party swaps

Answer

Float-fixed swaps

Question 5

When a significant amount of the proceeds are borrowed from the investor's broker, the situation is referred as as

Accepted Answer

Leverage investment

Answer

Forward investment

Answer

Non-leveraged investment

Answer

Future investment

Question 6

It is categorized as a future asset exchange contract when it involves a fixed price.

Accepted Answer

Forward contract

Answer

Present contracts

Answer

Spot contract

Answer

Future contracts

Question 7

To calculate _____, the capital gain is subtracted from the return to investors.

Accepted Answer

Periodic dividend payments

Answer

Constant spot rate payment

Answer

Constant forward rate payment

Answer

Constant future rate payment