unit 16

Question 1

leaps may be written for up to

Answer 1

39 months

Question 2

preemptive rights

Answer 2

issued to existing shareholders
the shareholder has the right to maintain percentage ownership
short term
exercise if below market or sell

Question 3

warrant

Answer 3

don’t need to be existing shareholder
grant owner right to purchase securites from issuer at specified price

long term
issued with an exercise price above cmv

Question 4

rights and warrants are considered

Answer 4

derivatives

Question 5

forward contracts

Answer 5

commitments
two party contract(growers and producers)
nonliquid
nonstandardized
terms negotiated(quantity, quality, time, price and place)

Question 6

futures contracts

Answer 6

standardized
exchange regulated
quantity, qual, time, place, price

Question 7

buyers and sellers for futures and forward

Answer 7

long(obligated to take a delivery)

seller(always obligated to make delivery)

Question 8

benefits forwards and futures

Answer 8

limit future price risk

lock in profit or expense

Question 9

risk of forwards and future

Answer 9

counterparty risk(fowards)
lack of liquidity(fowards)
daily margin(futures)
guess wrong