Q1. fill in the blanks

a. Options and futures are derivatives, however they differ because options are valuable _______ and futures are _______, options have ______ payoffs, futures ______ payoffs.

A) obligations, rights, linear, nonlinear

B) rights, linear, obligations, nonlinear

C) rights, obligations, nonlinear, linear

D) obligations, linear, rights, nonlinear

b. Rain-checks are like _______, car insurance is like _________.

A) currency forwards, currency futures

B) call-options, put-options

C) index forwards, index futures

D) commodity-options, commodity-futures

c. Forwards and futures are:

A) opposites, like two sides of the same coin

B) measures of the credit or default risk of companies

C) similar, both refer to transactions at a future date

D) measures of the interest rate risk of bonds

d. Early exercise is permitted for American options, however

A) early exercise is not optimal for American options

B) early exercise can be optimal for American put options

C) early exercise should be always used for American options

D) early exercise is always of value for American call options

e. One of the following is not a determinant of option values

A) stock price

B) exercise price

C) time to maturity

D) rate of return on stock