International Finance And Treasury - Study Mode

[#1] Method of auction of futures contract in which traders sell their futures contracts at a specified price by crying out in louder voices is classified as
Correct Answer

(D) open outcry auction

Explanation

Solution: Method of auction of futures contract in which traders sell their futures contracts at a specified price by crying out in louder voices is classified as open outcry auction. Open outcry is a method of verbal and hand signal communication used by traders at stock and futures exchanges. Signals and shouts convey trading information, intentions, and acceptance in the trading pits.

[#2] Gross proceeds of stock is $24000 and net proceeds are $35000 then under writers spread is
Correct Answer

(D) $11,000

Explanation

Solution: Underwriters spread = Net proceeds - Gross proceeds = $35000 - $24000 = $11,000.

[#3] Consider buying call option, if price of stock falls then buyer of call option has
Correct Answer

(D) high potential of losses

Explanation

Solution: Consider buying call option, if price of stock falls then buyer of call option has high potential of losses. Traders buy a call option in the commodities or futures markets if they expect the underlying futures price to move higher. Buying a call option entitles the buyer of the option the right to purchase the underlying futures contract at the strike price any time before the contract expires.

[#4] Position which occurs because of selling floor and buying cap is classified as
Correct Answer

(D) collar

Explanation

Solution: Position which occurs because of selling floor and buying cap is classified as collar. A collar, commonly known as a hedge wrapper, is an options strategy implemented to protect against large losses, but it also limits large gains.

[#5] Stock holder who does not have any voting rights in corporation is considered as
Correct Answer

(B) preferred stockholder

Explanation

Solution: Stock holder who does not have any voting rights in corporation is considered as preferred stockholder. Preferred stock is a type of ownership that receives greater demand on a company's profits and assets than common stock. While preferred shareholders do not typically have a right to vote in the company, they do hold the benefit of being paid dividends before common shareholders.