1. A Investor who enters into a long forward contract on British pounds will make a profit if the British pound spot price is higher than the forward price on the delivery date. 2. An open futures position may be closed out by delivery or by offset, and, depending on the contract, settlement of an open futures position may be by delivery or by cash settlement. 3. A Speculator who buys a European put on a share of stock will make a gain if the stock price is lower than the options exercise price + premium on the expiration date. 4. A trader who is hedging in the derivatives market is doing so to reduce the risk arising from exposure to the underlying asset. 5. The party with a short position in a futures contract has the option to choose the precise asset that will be delivered, where delivery will take place and when delivery will take place. 6. There is no difference between the operation of margin accounts administered by a clearinghouse and those administered by a broker. 7. If the daily price limit for a silver futures contract is $500, then the most that an investor can gain or lose in a day is $500. 8. Position limits limit the number of futures contracts that speculators can be net long or net short. 9. A long futures hedge is appropriate when a company plans to buy the underlying asset in the future and faces the risk that the asset price will increase. 10. A perfect hedge is one in which the hedge ratio equals 1. 11. If the term structure of interest rates is downward sloping, the forward rate for the period between 3.75 and 4 years exceeds the 4 year zero rate. 12. The duration of a bond portfolio captures the sensitivity of the bond portfolio value to a change in interest rates.