In A firm can hedge the risk of upward movement in raw material prices by: A. Buying a call option. B. Selling a put option. C. Buying a put option. D. Selling a futures contract
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Question 2 Options
In A firm can hedge the risk of upward movement in raw material prices by:
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- What is a REIT What are the advantages and disadvantages of REITs List and Describe the different types of REITs What is an OPTION Differentiate between a PUT and a CALL OPTION List and Describe the different types of OPTIONS What is a REPO What are the advantages and disadvantages of REPOS List and Describe the different types of REPOS What is the formula for calculating REPO RATE Define (a) Market Risk (b) Interest Rate Risk (c) Commodity Risk (d) Currency RiskWhich of these will increase the value of a call option? I. An increase in the market value of the underlying asset II. An increase in the option's exercise (or strike) price III. A decrease in the market value of the underlying asset IV. An increase in the volatility of the underlying asset's returns A) I and Il only в) I only C) I and IV only D) Il and III onlyHow can exchange-rate risk be hedged using forward, futures, and options contracts? OA. Firms can buy a put option to hedge against a rise in the exchange rate. OB. Firms can buy a call option to hedge against a rise in the exchange rate. OC. Firms can sell forward contracts to hedge against a rise in the exchange rate. OD. All of the above.
- Question 4 In the context of options, what is the "premium"? A) The cost of entering into the option contract B) The profit made from exercising the option C) The market price of the underlying asset D) The expiration date of the optionQUESTION 21 How does the presence of a convenience yield typically impact the pricing of futures contracts for a consumption asset, such as such as oil, metals, or agricultural products? O It has no effect on futures pricing. It tends to push futures prices higher It tends to push futures prices lowerQuestion 3: What are the pros and cons of using options traded in the over-the-counter market and in an exchange for hedging? Plz explain it
- Question 4 Futures Which of the following statements is correct? A. An option seller makes more profits than an option buyer. B. A futures seller makes more profits than a futures buyer. C. A futures buyer's profit will be equal to the futures seller's loss. D. Both futures buyer and seller makes profit.Question 2 Which type of financial derivative is used to protect against adverse price movements in an asset? A) Call option B) Put option C) Futures contract D) Swap contractAdvantages of currency futures contracts relative to forward contracts include _ a. Higher liquidity b. Standardized contract specifications c. Freedom to sell the contract before maturity d. All of the above
- When the price of the underlying financial instrument exceeds the exercise [strike] price of a call option, the option is said to be: A. ripe for a put.B. out of the running.C. in the money.D. dead on the money.which one is correct please confirm? Q19: Using Futures contract to transfer price risk is called diversifying. hedging speculation arbitrageM3 The terms "contango" and "backwardation" are used to describe term structures of forward/futures prices (i.e., patterns of forward/futures prices of various maturities). Please explain the meanings of these two terms and the situations in which they occur (i.e., the reasons for them). Also, consider futures prices of gold. Do you expect them to be in contango or backwardation? Why?