Which of the following describes a normal market:Group of answer choicesThe futures prices tend to fall over the life of a futures contract.All of the aboveFutures trade higher than spot prices.Futures prices for near months are lower than for distant months.None of the above.

Which of the following statements about futures are true:I. Futures is a standardised contract to buy or sell a specific commodity or financial instrument at a specific price at a predetermined future date;II. In Australia bonds futures are usually quoted at an index figure of 100 minus the yield so a dealer can follow a basic principle of buy low and sell high;III. Novation is the process to renew futures contracts when they fall due;IV. Standard delivery is more usual in futures markets.

Which of the following is a disadvantage of trading futures contracts?*1 pointa) Low volatilityb) Low transaction costsc) High liquidityd) High leverage

In the futures markets, if a futures contract is marked-to-market, this refers to the:Question 3Select one:a.interaction of the demand and supply forces in the market to determine the price of the options contract.b.interaction of the demand and supply forces in the market to determine the price of the futures contract.c.settlement of gains and losses on futures contracts on a daily basis.d.settlement of gains and losses on forward contracts on a daily basis.

In the futures markets, price differences between the futures and the underlying assets are reduced by the actions of:Group of answer choicesarbitrageurshedgersspeculatorstraders

In futures markets investors who expect to purchase future bonds can reduce the risk of price fluctuations by taking a/an:Question 8Select one:a.arbitrage position on futures contracts.b.long position on futures contracts.c.short position on futures contracts.d.marked-to-market position on futures contracts.