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CHAPTER 11: ADVANCED FUTURES STRATEGIES MULTIPLE CHOICE TEST QUESTIONS 1. The transaction designed to exploit mispricing in the relationship between futures and spot prices is called a. a repurchase agreement b. a hedge c. speculation d. cash and carry e. none of the above 2. The implied repo rate is similar to the a. internal rate of return b. cost of hedging c. yield on the futures contract d. all of the above e. none of the above 3. Find the annualized implied repo rate if you buy a 91-day T-bill at 98 and sell a futures contract on it at 99.5. (Note: these prices already reflect the discount on a 360-day basis.) a. 6.09 percent b. 1.53 percent c. 6.28 percent d. 2.03 percent e. 3.06 percent 4. Which one of the following options is not associated with the Treasury bond futures contract? a. end-of-the-month b. spread option c. wild card option d. quality option e. none of the above 5. The transaction in which a Treasury bond futures spread is combined with a Treasury bill futures transaction is called a a. Bond-bill spread b. MOB spread c. designated order turnaround d. turtle trade e. none of the above 6. The opportunity to lock in the invoice price and purchase the deliverable Treasury bond later is called a. bond insurance b. program trading c. the wild card d. delivery arbitrage e. none of the above  7. If the futures price at 3:00 p.m. is 122, the spot price is 142.5 and the CF is 1.1575, by how much must the spot price fall by 5:00 p.m. to justify delivery? a. 1.285 b. 1.1102 c. 20.50 d. 17.71 e. 42.94 8. How is the cost of a delivery option paid? a. the long pays the short with a cash settlement b. the short pays the long with a cash settlement c. a higher closing futures price d. a lower closing futures price e. none of the above 9. Find the annualized implied repo rate on a T-bond arbitrage if the spot price is 112.25, the accrued interest is 1.35, the futures price is 114.75, the CF is 1.0125, the accrued inter