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Everyday Science Questions & Answers Section 97

Ques No.1: The price of a stock is $100, and it could be $95 or $115 the next year. What is the expected return?

Ans: 5%

Ques No.2: The price of a stock is $100, and there are 40% chances that it would be $95 and 60% chances that it would be $115 the next year. What is the expected return?

Ans: 7%

Ques No.3: A company's agreement with the underwriter include

Ans: Spread and greenshoe option

Ques No.4: The long-run returns of Initial Public Offerings (IPOs) tend to_________the market.

Ans: Underperform

Ques No.5: Spread is_________for IPOs.

Ans: Highest

Ques No.6: The value of a financial derivative depends on the

Ans: underlying

Ques No.7: An agreement on a telephone or email to buy/sell an asset at an agreed future time for an agreed price is called

Ans: forward contract

Ques No.8: When forward contract is traded on an exchange, it is called

Ans: future contract

Ques No.9: On 1 January you enter a contract to buy 1 million barrel of oil for $80 per barrel to be delivered on 1 March. The price on 1 March is $82 per barrel. Your gain is

Ans: $2000000

Ques No.10: Allocating stock in popular new issues to manager of their important corporate clients is called

Ans: Spinning

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