1. Which of the following instruments are contracts but are not securities?

a. stocks b. options c. swaps d. (a and b) e. (b and c)

2. Which of the following are advantages of derivatives?

a. lower transaction costs than securities and commodities

b. reveal information about expected prices and volatility

c. help control risk

d. make spot prices stay closer to their true values

e. all of the above

3. A forward contract has which of the following characteristics?

a. has a buyer and a seller b. trades on an organized exchange c. has a daily settlement d. gives the right but not the obligation to buy e. all of the above.

4. If the market maker will buy at 4 and sell at 4.50, the bid-ask spread is

a. 8.50 b. 4.25 c. 0.50 d. 4.00 e. none of the above

5. Which of the following organizations has the ultimate regulatory authority in the futures industry?

a. National Futures Association b. Commodity Future Trading Commission

c. Commodity Exchange Authority d. Securities and Exchange Commission

e. None of the above

6. The derivatives exchange with the largest trading volume is the

a. Moscow Exchange b. Nasdaq OMX c. CME Group

d. Pacific Stock Exchange e. National Stock Exchange of India