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LOS c: Discuss the purposes and criticisms of derivative markets.
Q1. One reason that criticism has been leveled at derivatives and derivatives markets is that:
A) they are complex instruments and sometimes hard to understand.
B) derivatives have too much default risk.
C) derivatives expire.
Q2. All of the following are benefits of derivatives markets EXCEPT:
A) transactions costs are usually smaller in derivatives markets, than for similar trades in the underlying asset.
B) derivatives allow the shifting of risk to those who can most efficiently bear it.
C) derivatives markets help keep interest rates down.
Q3. Which of the following is a common criticism of derivatives?
A) Derivatives are too illiquid.
B) Fees for derivatives transactions are relatively high.
C) Derivatives are likened to gambling.
Q4. Which of the following statements about arbitrage is FALSE?
A) No investment is required when engaging in arbitrage.
B) If an arbitrage opportunity exists, making a profit without risk is possible.
C) Arbitrage can cause markets to be less efficient.
Q5. Financial derivatives contribute to market completeness by allowing traders to do all of the following EXCEPT:
A) narrow the amount of trading opportunities to a more manageable range.
B) engage in high risk speculation.
C) increase market efficiency through the use of arbitrage.
Q6. MBT Corporation recently announced a 15% increase in earnings per share (EPS) over the previous period. The consensus expectation of financial analysts had been an increase in EPS of 10%. After the earnings announcement the value of MBT common stock increased each day for the next five trading days, as analysts and investors gradually reacted to the better than expected news. This gradual change in the value of the stock is an example of:
A) inefficient markets.
B) speculation.
C) efficient markets.
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发表于 2009-3-2 09:30
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