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4. To profit from an expected increase in interest rates, a trader would a Take a long position in Treasury Bond futures b. Buy S&P 500 index futures c. Take a long position in wheat futures d Sell Treasury bond futures contracts. 5 Which of the following terms is specified in a futures contract? 1. The contract size 2. The maximum acceptable price variation during the term of the contract. 3. The acceptable quality grade of the commodity of the contract. 4. The settlement price. a I and 4 b. 1, 2, and 4 e. 1.3, and 4 d. 1.2, 3, and 4 6 With regard to futures contracts, "margin" is a. A good faith deposit made at the time of the contract is bought or sold. b. The maximum percentage that the price of the underlying asset can change before it is marked-to-market. c. The maximum percentage that the price of the contract can change before it is marked to market d. The amount of the money borrowed from the broker to buy a contract 7. The basis for a future contract is defined as: a. The spot price minus futures price. b. The spot price minus forward price. c. The futures price minus forward price. d. The futures price minus spot price. for the purpose of minimizing default risk 8 Futures exchanges require all contracts to be a. Standardized b. Marked-to-market c Settled in cash d. Delivered on time. 9. Which of the following statements regarding plain vanilla interest rate swaps NOT true? a. The counterparties agree to exchange interest payments b. The full amount of interest received by each party is paid to the other. e. They are used to manage interest rate risk. d. Payments from a fixed interest rate are exchanged with payments from a floating interest rate, 10

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