Pricing and Valuation of Futures Contracts practice questions

What to know

Identify the rule, formula, or decision criterion before reading the answer choices. CFA Level I distractors often use the right vocabulary with the wrong condition.

How to practice

Work each item under time pressure, then compare your reasoning with the step-by-step explanation and key takeaway.

Review signal

Missed questions should become scheduled reviews when the error comes from a concept gap, formula setup, or answer-choice trap.

Derivatives

Pricing and Valuation of Futures Contracts

Immediately after a futures contract has been marked to market at the daily settlement price, the value of the contract is most likely:

Derivatives

Pricing and Valuation of Futures Contracts

A three-month interest rate futures contract on the market reference rate is quoted at a price of 97.20. The annualized futures market reference rate implied by this quote is closest to:

Derivatives

Pricing and Valuation of Futures Contracts

Lucia Fernandez buys two gold futures contracts at a price of USD 1,950.00 per ounce; each contract covers 100 ounces. The initial margin is USD 8,000 per contract and the maintenance margin is USD 7,200 per contract. At the end of the first trading day, the settlement price is USD 1,940.00. The variation margin Fernandez must deposit is closest to:

Derivatives

Pricing and Valuation of Futures Contracts

A futures contract and an otherwise identical forward contract are written on the same underlying asset. The futures price most likely exceeds the forward price when the underlying's futures price is:

Derivatives

Pricing and Valuation of Futures Contracts

As a commodity futures contract approaches its expiration date, the difference between the futures price and the spot price of the underlying most likely:

Derivatives

Pricing and Valuation of Futures Contracts

Kwame Mensah sells four crude oil futures contracts at USD 72.50 per barrel; each contract covers 1,000 barrels. The initial margin is USD 5,500 per contract and the maintenance margin is USD 5,000 per contract. Settlement prices are USD 72.95 at the end of Day 1 and USD 73.30 at the end of Day 2. Mensah makes no withdrawals or deposits before any required margin call. The variation margin Mensah must deposit at the end of Day 2 is closest to:

Derivatives

Pricing and Valuation of Futures Contracts

Ingrid Larsen is long one three-month interest rate futures contract with a notional principal of USD 1,000,000. The contract is quoted at 97.50 when she buys it, implying an annualized market reference rate of 2.50%. At the next daily settlement, the quoted price is 97.26. Using a 90/360 period adjustment, the mark-to-market settlement on Larsen's position for that day is closest to:

Derivatives

Pricing and Valuation of Futures Contracts

One investor holds a long forward contract and another holds a long futures contract on the same underlying with the same expiration. The price of the underlying rises steadily over the life of both contracts. The difference in how the two investors' gains are received is best described as follows:

Derivatives

Pricing and Valuation of Futures Contracts

Futures prices on an asset are strongly negatively correlated with interest rates. Relative to the price of an otherwise identical forward contract on that asset, the futures price is most likely:

Derivatives

Pricing and Valuation of Futures Contracts

Priya Raman sells four equity index futures contracts at a price of 1,850.00; the contract multiplier is USD 25 per index point. The settlement price is 1,861.50 at the end of Day 1 and 1,842.75 at the end of Day 2. The cumulative mark-to-market cash flow on Raman's position over the two days is closest to:

Derivatives

Pricing and Valuation of Futures Contracts

Tomas Novak buys two silver futures contracts at USD 24.80 per ounce; each contract covers 5,000 ounces. The initial margin is USD 9,900 per contract and the maintenance margin is USD 9,000 per contract, and Novak deposits exactly the initial margin. The settlement price below which Novak will receive a margin call is closest to: