Chapter 1 Practice Questions
1. Which of the following was the first act to impose federal regulations on the brokers trading on the floors of commodity exchanges?
A. Commodity Futures Trading Commission Act of 1974
B. Grain Futures Act
C. Commodity Exchange Act of 1936
D. Shad-Johnson Accord
2. Which of the following is not correct regarding futures exchanges?
A. The Chicago Mercantile Exchange (CME) trades mostly in foreign exchange and stock index futures.
B. The Chicago Board of Trade (CBOT) focuses on agricultural commodity and interest rate futures.
C. The New York Mercantile Exchange (NYMEX) focuses on energy futures and metals.
D. The New York Board of Trade (NYBOT) focuses exclusively on the grains futures markets.
3. Which of the following is not classified as a commodity?
A. Livestock
B. Automobiles
C. Corn
D. Oil
4. Which of the following is a security?
A. Bond
B. Futures
C. Options
D. Swaps
5. Which is true about the difference between forward contracts and futures contracts?
A. Forward contracts have greater counterparty risk than futures contract.
B. Forward contracts are more appropriate for small transactions than futures contracts.
C. Forward contracts are subject to more regulation than futures contracts.
D. Forward contracts are legal in fewer states than futures contracts.
6. All of the following are standardized on futures contracts except:
A. The number of contracts and their price
B. The contract grade
C. The unit size and tick size
D. The trading hours and last trading day
7. If you have a short position on something, you hope that its value will:
A. Rise
B. Fall
C. Stay the same
D. Change in either direction
8. Which of the following best describes excess margin?
A. The difference between an initial margin requirement and a minimum maintenance requirement
B. Money in a margin account that ex