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Question
Why are options referred to as derivative instruments?Answer
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Related questions
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The strong appreciation of the dollar for the last part of the 1990s: A. was a benefit to all U.S. residents but costly to most foreign producers.B. was a benefit to U.S. exporters, but put a severe strain on U.S. Importers.C. was welcomed by all U.S. manufacturers.D. played a key role in keeping inflation in check even though the economy was growing rapidly.
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There was a lot of pressure on U.S. policymakers in late 1999 and into the early 2000's to decrease the value of the dollar. This pressure was coming mainly from: A. importers.B. foreign manufacturers.C. U.S. manufacturers.D. foreign central banks.
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An increase in the real interest rate on U.S. bonds, everything else equal, will have the following impact on the foreign exchange market: A. the demand for dollars will decrease.B. the supply of dollars will increase.C. the dollar will depreciate relative to foreign currencies.D. the demand for dollars will increase.
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Differences in inflation rates between two countries can explain: A. short-run changes in the exchange rate but not long-run changes.B. changes in the real exchange rate over the long run, but not changes in the nominal exchange rate.C. long-run changes in the exchange rate but not short-run changes.D. changes in the exchange rate in both the short run and the long run.
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The empirical evidence on purchasing power parity seems to point out that: A. purchasing power parity can explain long run movements in exchange rates but does not hold up to scrutiny for short-run changes.B. purchasing power parity does a good job of explaining short-run movements in exchange rates, but does not hold up to scrutiny over the long run.C. purchasing power parity is a good theory for international trade, but is of little use in explaining exchange rate movements.D. inflation and a country's rate of currency appreciation are positively correlated.
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Explain why for speculation, the purchase of an option may be more attractive than a futures contract or the outright purchase of the underlying asset.
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Why do government debt managers often use interest-rate swaps?
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If the current closing price in the stock of XYZ Inc., is $87.50 and the July expiration put options with a strike price of $80 are selling for $1.05, what is the intrinsic value of the option? What is the option premium?
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Adverse selection: A. increases the efficiency of most markets.B. usually causes prices to adjust faster than they otherwise would.C. makes it easier for all customers to find what they want.D. results in fewer market transactions.
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Compare/contrast the Nasdaq Composite Index with the Dow Jones Industrial Average.
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