Which of the following is the most accurate statement regarding the risks of derivatives? Which of the following is NOT a derivative? The development of derivative investments in a particular market...

Which of the following is the most accurate statement regarding the risks of derivatives?
Which of the following is NOT a derivative?
The development of derivative investments in a particular market is often a result of:
Ned has no holdings of soybeans, nor is he involved in any business related to soybeans. However, he frequently purchases soybean futures. This use of derivatives is most likely for:


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Which of the following is the most accurate statement regarding the risks of derivatives? Answer Derivatives can be very safe or very risky, depending on how they are used. Futures are generally safe, while options are generally risky. Derivatives are almost never risky, despite what most people think. Derivatives are almost always very risky, but they have high rewards. Which of the following is NOT a derivative? Answer A contract that pays ($p – $3) × 100 to the purchaser, where p is the price of gas at Sam's Club one year from now. A $100 bet based on the price of gas at Sam's Club three months from now. An option on Wal-Mart stock. A share of Wal-Mart stock. The development of derivative investments in a particular market is often a result of: Answer An increase in production in that market. An increase in volatility and risk in that market. An increase in profitability in that market. Stronger regulations in that market. Ned has no holdings of soybeans, nor is he involved in any business related to soybeans. However, he frequently purchases soybean futures. This use of derivatives is most likely for: Answer risk management. speculation. regulatory arbitrage. reduced transactions costs. A $50 Call option on XYZ stock begins trading for the first time today. The premium on the option is $3 and the price of XYZ stock is $48 for the entire day. During the day, Al buys 10 contracts from Bea, and Cal buys 20 contracts from Dave. Find the open interest at the end of the day. Answer 90 1,440 1,500 30 You have just entered a contract that obligates you to sell 20 ounces of gold in six months at a price of $800 per ounce. Which of the following is the correct terminology for your position? Answer You are "out" gold forwards. You are "short" gold forwards. You are "covered" gold forwards. You are "long" gold forwards. You have just received a quote on a certain option as bid $2.10, ask $2.14. If you want to purchase this option...



May 26, 2022
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