EBF 301 EBF301 Lesson 8 Quiz 1 Answers (Penn State University)

EBF 301 EBF301 Lesson 8 Quiz 1 Answers (Penn State University)


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EBF 301 EBF301 Lesson 8 Quiz 1 With Answers (Penn State University)

Readings from Errera & Brown Chapter 3


Circle the response that best fits the question.


1) Futures contract prices are determined in a ____________ market. 

a. Haphazard

b. Random

c. Efficient

d. Volatile

2) The price difference between cash and futures is called _________.

a. Forwards

b. Convergence

c. Backwardation

d. Basis

3) The term that describes the correlation between futures and physical prices is known as, ______________.

a. Convergence

b. Parallelism

c. Contango

d. Volatility

4) The tendency for futures and cash prices to trade close to one another as the futures contract nears expiration is __________.

a. Parallelism

b. Delta

c. Convergence

d. Gamma

5) Commercial entities wishing to hedge must take a position in the financial markets that is ______________ to their physical position.

a. Similar

b. Opposite

c. Convergent

d. Identical

6) Speculators use both ______________ and __________ analysis in their trading decisions.

a. Weather and Economic

b. Stock indexes and US Treasury rates

c. Fundamental and Technical

d. Global and Domestic






7) A futures market where each successive month’s price is higher than the previous one is known as, “______________”

a. Backwardated

b. Inverse

c. Reverse

d. Contango

8) _______________ is the trading of price, time or location differences between the same or different commodities.

a. Arbitrage

b. Spread

c. Swap

d. Option

9) The term given to the value between financial commodity delivery points and physical delivery points is _____________.

a. Basis

b. Locational Basis

c. Price Basis

d. Delivery Basis

10) Buying January, 2013 NYMEX Crude Oil contracts and selling April, 2013 NYMEX Crude Oil contracts is an example of ____________

a. Buyer’s hedge

b. Seller’s hedge

c. Arbitrage

d. Financial Swap

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