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USE FOR QUESTION 1-3. On Tuesday Frank found a car that he is interested in purchasing and has negotiated a price of $24,000. Frank has
USE FOR QUESTION 1-3. On Tuesday Frank found a car that he is interested in purchasing and has negotiated a price of $24,000. Frank has to talk the decision over with his wife before he can make the purchase so Frank pays the dealer $100 to hold the car for one day. This deal is very similar to an option contract. 1. True or False: This deal MORE closely resembles a put option as opposed to a call option. 2. The strike price of this option is (choose the number that is the closest): a. $100 b. $0 c. $24,000 d. one day 3. The 'premium' for this option is: a. $100 b. $0 c. $24,000 d. one day 4. True or False: If a trader shorts a futures contract they are entering into an obligation to accept delivery of that commodity on a specified date in the future. 5. True or False: A long hedger is a trader that primarily uses futures contracts to speculate on futures prices. 6. True or False: A short hedger is a trader that will have a commodity to sell at some point in the future. 7. True or False: Both forward contracts and futures contracts can be used to manage risk. 8. True or False: Both forward contracts and futures contracts can be customized to suit the needs of the parties involved
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