Chapter 5 Practice Questions
- 1. Which of the following is a synthetic long call?
- A. Long futures position and long call position
- B. Long futures position and long put position
- C. Short futures position and long put position
- D. Short futures position and long call position
- 2. Which of the following could be combined with a shorted futures contract to create a synthetic short call investment?
- A. Short call
- B. Long call
- C. Short put
- D. Long put
- 3. A synthetic long futures position consists of:
- A. Any long call and short put for the same underlying contract
- B. Any short call and long put for the same underlying contract
- C. A long call and short put at the same strike and expiration for the same underlying contract
- D. A short call and long put at the same strike and expiration for the same underlying contract
- 4. A forward conversion combines which two of the following?
- I. A long futures contract
- II. A short futures contract
- III. A short call and a long put on the futures contract
- IV. A long call and a short put on the futures contract
- A. I and III
- B. I and IV
- C. II and III
- D. II and IV
- 5. Suzie is long an April dry whey futures contract. If she then buys a put on the same contract, she has created which of the following?
- A. A synthetic put
- B. A synthetic call
- C. A forward conversion
- D. A synthetic short futures contract
- 6. Which of the following best describes the difference between a futures conversion and a synthetic futures contract?
- A. Conversions always include a put option, while a synthetic futures contract does not.
- B. Conversions always include a call option, while a synthetic futures contract does not.
- C. Conversions include multiple synthetic futures.
- D. Conversions include an actual futu