True               False

1. In order to properly value a derivative investment it isnecessary to knowthe        

     notionalamount.                                                                                                              _____           _____

2. A derivative instrument involving a futures contract to buycorn requires that the

    commodity actually be delivered.                                                                                      _____           _____

3. A forward contract to sell a foreign currency has increasedin value if the forward

     rate is less that the current spotrate.                                                                                   _____           _____

4. The present value of a forward contract can only bedetermined if the forward rate is

     discounted to the present.                                                                                                 _____           _____

5. A futures contract differs from a forward contract in thatthe former typically requires a

    margin account and is typically astandardized rather than customizedcontract               _____           _____

6. The value of an option can be allocated to two componentparts, the time and the

     intrinsicvalue                                                                                                                    _____           _____

7. A put option and a call option refer to the right to buy andsell a quantityrespectively        _____           _____

8. If a put option at an exercise price of $12 per unit when themarket value per unit is $13

    has a value of $0.50 per option, then thereis no time value associated with theoption        _____           _____

9. An option related to a commodity with a lot of pricevolatility would tend to increase the

    time value of theoption                                                                                                      _____           _____

10. If a borrower had debt financing requiring the payment if afixed rate of interest, an

      interest rate swap would beprudent if it was assumed that variable interest rates were to

      increase over fixed interestrates.                                                                                      _____           _____

11. If a creditor with a loan bearing a variable rate ofinterest were to swap variable rates for

     fixed rates, their interest net cashflow would be the differential between the respectiverates  _____           _____

12. If an entity were to acquire a derivative instrument purelyfor investment purposes, the

      investment would bemarked-to-market with changes in value being recognizedcurrently

      inearnings                                                                                                                            _____           _____