MULTIPLE CHOICE 23) Motivation for investing in commodities or commodity securit

Question

MULTIPLE CHOICE

23) Motivation for investing in commodities or commodity securities is that:

(I) they have high correlation with the stock and bond

(II) generally they have low to negative correlation with stock & bond

(III) generally they have positive correlation with inflation

a. (I) & (II)

b. (I) & (III)

c. (II) & (III)

24) You would like to protect your portfolio of Bristish equity against a downward movement of the British stock market. Which derivative can be used to achieve this?

(I) Futures

(II) Call Options

(III) Put Options

a. (I) and/or (II)

b. (II) and (III)

c. (I) and/or (III)

25) The December futures contract of the Australian ASX index quotes at 4,050. The multiple is 25 AUD. The next day, this contract quotes at 4,070. What is the gain/loss for an investor short in one contract?

a. A$500

b. A$(500)

c. A$20

Explanation / Answer

1) II & III

2) I & II

3) Gain = 20*25 i.e AUD 500

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