Finance Questionnaire

1. John likes futures contracts. Assume today’s settlement price on a CME EUR futures contract is $0.9716/€. John has a long position in one CME EUR futures contract. The contract size is €125,000. His margin account currently has a balance of $1,700. His maintenance margin requirement is $1,500. Also assume that the next three days’ settlement prices are $0.9702/€, $0.9709/€, and $0.9625/€

After daily marking-to-market on the third day, he will have realized a cumulative ____ of ________ in his account.

[Please note that to avoid any problem with rounding numbers, the choices are given as being close to a given value. Additionally, the choices are set in a way that the values are significantly different to avoid any room for potential error.]Question 1 options:

loss, close to $2,837.50

loss, close to $562.50

gain, close to $2,837.50

gain, close to $562.50

None of these

2. In estimating the beta of a stock using the OLS methodology, a portfolio manager determined that the R2value was 10%. This indicates that 10% of the stock’s risk is associated with the ________ and _____ of the remaining risk is related to ______.Question 2 options

non-systemic, 10%, firm specific risk

non-systemic, 90%, firm specific risk

systemic risk, 90%, non-diversifiable risk

systemic risk, 10%, diversifiable risk

systemic risk, 90%, firm specific risk

3. “If a Canadian company issues a Yankee bond, it will be immune to exchange rate risk. However, if it issues a Euro bond in the USA it will be exposed to exchange rate risk.”

The statement above is ____.Question 3 options:

true

false

4. According to some research in forecasting future exchange rates, forward rates were more accurate (on average) than professional forecasting services in terms of being ______. Professional forecasting services were more accurate in predicting the ______ of change.Question 4 options:

magnitude, direction

direction, closer to the actual spot rate

None of these

correct on the direction of change, magnitude

closer to the actual spot rate, direction