Derivatives - Derivatives Section 2
26. If future prices are negatively correlated with interest rates:
- Option : B
- Explanation : The reason is because rising prices lead to futures profits that are reinvested in periods of falling interest rates, and falling prices leads to losses that occur in periods of rising interest rates.
27. If futures prices are positively correlated with interest rates, a long party:
- Option : A
- Explanation : If futures prices are positively correlated with interest rates, futures contracts are more desirable to holders of long positions than are forwards. This is because rising prices lead to future profits that are reinvested in periods of rising interest rates, and falling prices lead to losses that occur in periods of falling interest rates.
28. In contrast to a futures contract, a forward contract is:
- Option : C
- Explanation : When futures prices are negatively correlated with interest rates, long prefers forward contracts.
30. The value of a futures contract is the:
- Option : C
- Explanation : Value accumulates from the previous settlement and goes to zero when distributed.f
*/?>
*/?>
*/?>
*/?>