Tom plan to buy a pencil at the stationery store. Tom and stationery store owner Jack entered into following contract. :After the first month, Tom buy a pencil for $1,000 to Jack.

After the first month, if the demand of pencil was fallen because of the increase of demand of the mechanical pencil, so pencil price was $500, Tom's loss on contract is $500. (If Tom had not contracted with Jack, He could have purchased pencil for $500. But Tom have to buy a pencil for $1,000 when expiration date come because of contract with Jack.)

On the contrary, suppose that many students purchased pencil for a month because famous entertainer encourage to use the pencil, so pencil price was $2,000, Tom's gain on contract is $1,000. (If Tom had not contracted with Jack, He should have purchased pencil for $2,000. But Tom can buy a pencil for $1,000 when expiration date come because of contract with Jack.)

This type of the transaction is called : Swap.

A. True B. False

This type of the transactions are called outside market and have a default risk.

A. True B. False

This type of the contract always no require initial contract price, because this contract is always mutually contracted at-the-money condition.

A. True B. False

This type of the contract have effective portion only. ineffective portion does not exist.

A. True B. False

If we illustrate above-mentioned transaction by graph, suppose that x-axis is price of a pencil, y-axis is gain or loss, and a-value is price of contracted price. (1) Tom's purchase gain or loss equation is 'y=x-a', and graph shape is 'right bottom'. (2) Jack's sales gain or loss equation is 'y=a-x', and graph shape is 'right top'

A. True B. False