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Questions and Answers
What is the basic principle behind using a derivative product to manage an identified risk exposure?
What is the basic principle behind using a derivative product to manage an identified risk exposure?
- Guaranteeing a profit from the derivative product
- Ignoring the current market conditions
- Speculating on future market movements
- Locking in a price today that will apply at a specified future date (correct)
What determines the price of a derivative contract?
What determines the price of a derivative contract?
- Specified underlying commodity or financial instrument traded in the physical markets (correct)
- Historical price movements
- Government regulations
- Current market sentiment
Which of the following is a generic derivative product?
Which of the following is a generic derivative product?
- Stocks
- Real estate
- Futures (correct)
- Bonds
If commodity prices, interest rates, exchange rates, or share market prices move, what happens to the value of related derivative contracts?
If commodity prices, interest rates, exchange rates, or share market prices move, what happens to the value of related derivative contracts?
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What does an interest rate futures contract derive its price from?
What does an interest rate futures contract derive its price from?
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