Complete the sentence-A put option on a futures contract gives its owner:
A. The right to sell a futures contract at the strike price.
B. The right to sell a futures contract at the market price.
C. The right to buy a futures contract at the strike price.
D. The right to buy a futures contract at the market price.
Answer: A. The right to sell a futures contract at the strike price.
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Refer to Figure 14.3. Suppose the economy is initially at long-run equilibrium and the economy experiences a demand shock such as a stock market crash. The economy then reaches a new, short-run equilibrium point
Assuming expectations are adaptive, this will allow the central bank to decrease the real interest rate, moving the economy to a another new equilibrium point. The stock market crash is temporary, so as the economy works its way back to long-run equilibrium, real GDP will increase. As the expected rate of inflation changes, the economy will move from A) point A to point C. B) point D to point C. C) point A to point D. D) point B to point C.
Assuming a market rate of interest equal to 7 percent, what is the present value of $200 to be received one year from today?
A) $123 B) $156 C) $187 D) $210