Question : 40. The purpose of a margin account for a futures contract : 1284498

40. The purpose of a margin account for a futures contract is to: 
A. guarantee a minimum margin of profit for the contract holder.
B. allow futures traders to have more than one contract at once.
C. provide a cushion for the exchange against defaults on the contract.
D. hold interest payments until expiration.

41. The process of marking a futures contract to market means that: 
A. the profitability of the contract is locked in from the onset of the contract.
B. the amount of commodity to be delivered changes as prices change.
C. contracts are closed out as soon as they become unprofitable.
D. profits or losses are posted to the contract daily.

42. The effect of marking a futures contract to market is similar to: 
A. requiring daily payments from the contract buyer.
B. requiring daily payments from the contract seller.
C. closing the current position and opening a new position daily.
D. imposing a daily fee on both buyers and sellers.

43. The primary purpose of financial futures is to: 
A. benefit from increases in interest rates.
B. protect against swings in interest rates or prices of financial assets.
C. translate one currency into another.
D. guarantee the repayment of loan principal.

44. The basic difference between speculators and hedgers in futures contracts is that speculators: 
A. will profit regardless of the direction of price change.
B. are not protecting their commodity holdings.
C. are concerned only with long-term price movements.
D. take a position in more than one commodity at a time.

45. If the market for corn futures has more prospective sellers than buyers, then one would expect: 
A. the price of corn futures to decrease.
B. the price of corn futures to increase.
C. some traders to change from seller to buyer.
D. the market to cease operations until demand is rebalanced.

46. Which of the following is not correct concerning forward contracts? Forward contracts: 
A. are not standardized.
B. do not set the price until the end of the contract.
C. are not traded on organized exchanges.
D. are not marked to market daily.

47. You enter into a forward contract to take delivery of 1 million euros 3 months from now. What happens to the price you will pay at expiration if marks depreciate during the contract? 
A. Your price will increase.
B. Your price will decrease.
C. Your price was fixed at the onset of the contract.
D. Your price was fixed, and you will receive correspondingly more marks due to the depreciation.

48. In an interest rate swap, borrowers typically exchange fixed-rate payments in one currency for: 
A. fixed-rate payments in another currency.
B. variable-rate payments in another currency.
C. fixed-rate payments in the same currency.
D. variable-rate payments in the same currency.

49. Managers are willing to pay a price to hedge because: 
A. they receive increased profits in return.
B. the returns on derivative instruments are not taxed.
C. they value the reduction in uncertainty.
D. it permits the managers to receive higher cash bonuses.