5. With respect to the value of a futures contract, which of the following statements is most accurate? The value is: a. The current spot price minus the forward price. b. The present value of the expected payoff at expiration. c. Zero because it is settled daily. d. The accumulated gain since the previous settlement, which resets to zero upon settlement. 6. Everything else being the same as a borrower you would rather have which compounding frequency: a. Annual b. Quarterly C. Continuous d. Monthly e. Semi-Annually 3. The price of a stock on February 1 is $134. A trader sells 2 call option contracts (100 shares per contract) on the stock with a strike price of $137 when the option price is $8. The options are exercised when the stock price is $155. The trader's net profit or loss is a. Gain of $1,600 b. Loss of $1,600 C. Gain of $2,000 d. Loss of $2,000 e. Gain of $3,600 f. Loss of $3,600 4. Which of the following best describes how derivatives are priced? a. A hedge portfolio is used that eliminates arbitrage opportunities. b. The payoff of the underlying is adjusted downward by the derivative value. C. The expected future payoff of the derivative is discounted at the risk-free rate plus a risk premium d. The hedge ratio is compared to the net long/short position 7. Futures are more liquid than forward contracts: a. True b. False 8. Futures contracts are easier to customize than forward contracts a. True b. False