All Forward Contacts Are Marked To Market Essay

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1. All forward contacts are marked to market.

(A)
TRUE
(B)
FALSE

2. The primary purpose of marking-to-market or the process of updating a traders margin accounts to account for gains or losses incurred over the trading day is __________.

(A) protect the clearing house (guarantor) insuring traders fulfill agreements
(B)
to help fund clearing house operations via interest earned on margin accounts
(C)
to create a mechanism of matching buyers to sellers
(D)
to create a mechanism that allows the exchange to observe price movements
(E)
both (A) and (B)

Q4 Another name for a margin is ________________

(A) division (B) performance bond
(C)
clearing bond
(D)
sufficiency guarantee
(E)
none of the above

Question 5

If a trader is "short" in the market and the price of the futures contract decreases then the trader __________.

Answers

(A) losses money

(B) gains money

(C) will not know if they have gained or lost money until the contract expires

(D) will receive a margin call from their broker

(E) will receive a margin call from the clearing house

Question 6

Margins are typically changed

Answers

(A) during trading hours so that traders are aware that they have changed.

(B) during trading hours to reflect current market conditions.

(C) after trading hours and usually with at least 24 hours notice.

(D) after trading hours so that traders don't become discouraged at changes in the margins.

(E)
None of the above

Question 7

Exchanges set margins so as to decrease prices in inflationary periods.

Answers

(A)
TRUE

(B)
FALSE

Q9 Margins ___________ in more volatile periods.

(A) are higher
(B)
are lower
(C)
remain the same

Question 10

Minimum margin requirements for traders are set by ______________.

Answers

(A) the exchange where the contracts are traded

(B) the clearing house associated with the exchange where the contracts are traded

(C) the trader's broker

(D) the National Futures Association (NFA)

Question 11

If a trader is "long" in the market and the price of the futures contract decreases then the trader __________.

Answers

(A) losses money

(B) gains money

(C) will not know if they have gained or lost money until the contract expires

(D) will receive a margin call from their broker

(E) will receive a margin call from the clearing house

Question 12

Maintenance margins have traditionally be set to approximately _________ of the a contract's initial margin.

Answers

(A) five percent (5%)

(B) ten percent (10%)

(C) fifteen percent (15%)

(D) sixty six percent (66%)

(E) ninety five percent (95%)

Question 13

If the nearby contract for WTI crude oil is trading at $49.08 per barrel and there are 1,000 barrels in a contract, what is the "face value" of the contract today?

Answers

(A)
$49080.00

(B)
$4908.00

(C)
$4450.00

(D)
$1000.00

(E)
Can't be determined with information provided.

Question 14

If a trader who has taken a long position in the market has two margin calls then it must be the case that the trader on the other
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