Which of the following statement is NOT true about derivative contracts?Review LaterDerivative contract can be seen as a bet on which way the price of its underlying asset may move in the future.A long position is a bet that the number is going to fall while a short position is a bet that the number will rise in the future.Companies often use derivative contracts to transfer risk to another party.Derivatives are often used for hedging, which aims at protecting a current financial position from potential losses.

Derivative contract can be seen as a bet on which way the price of its underlying asset may move in the future.

Which of the following statements is FALSE? Select one: a. Some financial derivatives can be bought over-the-counter. b. Some financial derivatives can be bought and sold on an exchange. c. Hedging is the same as gambling in the financial markets. d. When a business has a naturally short position with respect to a commodity, its profit will decrease as the market price of the commodity increases.

Which of the following is TRUE:Group of answer choicesNone of the above.A short position in a forward contract gives you the right and the obligation to buy an asset at a specified price, at a specified time in the future.Only the counterparty, which is short futures, is required to deposit money in a margin account.A long forward contract is equivalent to a long position in a put option and a short position in a call option.Buying an option to sell is the same as selling an option to buy.

Which of the following is CORRECT? A. Derivatives can only be used in investments but not in corporate finance. B. Derivatives are traded by institutions but not by individual investors. C. Hedgers use derivatives to bet on the price movement of underlying assets. D. Investors must maintain a margin account to trade the futures contract. E. During the life of a futures contract, an arbitrage opportunity arises if the spot price deviates away from the futures price. F. The delivery period only allows for one day and the settlement must be made fast.

Which of the following statements about futures are false:I. Long position occurs when the futures contract is initially sold and subsequently bought in future;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. Short position implies selling asset at a future date and correspondingly selling futures contract today.