7. The "3 Z's of Derivatives are: (A) Zero-Initial Value (B) Zero-Supply Contract (C) Zero-Sum Game (D) All of the above Answer: 8. The Forward Price of a forward contract is: (A) contracted now to transact immediately (B) contracted now to transact later at the delivery date (C) contracted later at the delivery date (D) All of the above Answer: 9. In Futures markets, margin accounts are: (A) subject to daily settlement (B) deposits required from both side of the futures contracts (C) marking-to-market (D) All of the above Answer: 10. A speculator has a long forward contract with Forward or Delivery Price (Fo or K) $250. The Spot Price at delivery date (ST) = $275. Which of the following is the correct payoff to this long forward at delivery date (time 7)? (A) -25 (negative) (B) 0 (zero) (C) +25 (positive) (D) +275 (positive) Answer: Questions 11 and 12 below are based on the following information and assumptions: AAA takes a Long position in 1 futures contract on cheese. The cheese futures contract has contract size = 100 units (multiplier). BBB takes a Short position in 1 futures contract on cheese. The cheese futures contract has contract size = 100 units (multiplier). The value of 1 futures contract is $10,000 (= $100 *100). The Margin Account is 10% of the value of a futures contract, i.e., the Margin Requirement is $1000 (This is also the Initial Margin). The Maintenance Margin = 75%*$1000 = $750 The following table provides information of Futures Price (5) from Time 0 to 3: Timet Futures Price Change in Dollar Value of One Futures Contract from time t-1 tot (note: each contract has multiplier = 100) Time 0 $100 Time 1 $101 = +$1*100 = +$100 Time 2 $105 = +$4*100 = +$400 Time 3 $105 = $0*100 = $0 11. Question: given the above information, when does AAA (with Long position in futures) experience a Margin Call? (A) AAA experiences a margin call at Time 2 only (B) AAA experiences a margin call at Time 3 only (C) AAA experiences margin calls at Time 2 and Time 3 (D) AAA does not experience any margin call from Time 1 to Time 3