2- For the owner (buyer) of a call option, the potential losses are _____ while the potential gains are _____:

1. Unlimited; limited
2. Limited; unlimited
3. Limited; limited
4. Unlimited; unlimited
5. None of the above

3- Your firm is required to make fixed-rate interest payments but prefers to make floating-rate payments. Another firm is obligated by its bond indenture to make floating-rate payments but desires to make fixed-rate payments. You can help both firms achieve their preferences by arranging a(n) ___________.

A) interest rate forward contract

B) interest rate futures option

C) interest rate swap

D) interest rate option contract

E) none of the above

4- What do we mean when we say a contract is a zero-sum game?

A) Both parties either make money or lose money, in equal amounts.

B) Neither party to the contract loses any money.

C) Neither party to the contract makes any money.

D) Neither party pays any money at the outset of the contract.

E) None of the above.