Author Question: The choice between futures and options A) depends on whether the underlying instrument is a debt ... (Read 121 times)

xclash · **on:** Jun 30, 2018

The choice between futures and options

A) depends on whether the underlying instrument is a debt instrument or an equity.
B) reflects a trade-off between the higher cost of using options and the extra insurance benefits that options provide.
C) reflects a trade-off between the higher cost of using futures and the extra insurance benefits that futures provide.
D) reflects a trade-off between the greater risk from using options and the extra insurance benefits that options provide.

Question 2

Which of the following represents a positive supply shock, a negative supply shock, a positive demand shock, or a negative demand shock?

a. The government unexpectedly doubles all personal income tax rates.
b. A newly discovered infectious disease shuts down all international ports indefinitely.
c. Major technological progress occurs in the market for green energy.
d. An earthquake wipes out 60 of the manufacturing capacity of an economy.
e. The government unexpectedly eliminates the inheritance tax and the capital gains tax on sales of stocks and bonds.

otokexnaru · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

B

Answer to Question 2

a. negative demand shock
b. negative supply shock
c. positive supply shock
d. negative supply shock
e. positive demand shock