Question: 2. Determine whether the statement is true or false. (2x6 points) (1) The vast majority futures contracts do not lead to delivery. Answer: (2) A

2. Determine whether the statement is true or false. (2x6 points)

2. Determine whether the statement is true or false. (2x6 points) (1) The vast majority futures contracts do not lead to delivery. Answer: (2) A short hedge is appropriate when a company knows it will have to purchase a certain asset in the future and want to lock in a price now. Answer: (3) Options can be either American or European, a distinction that is related to the geographical location. Answer: (4) Both put and call American options become more valuable as the time to expiration increases. Answer: (5) The outcome with hedging will always be better than the outcome without hedging. Answer: (6) Arbitrageurs are in business to take advantage of a discrepancy between prices in two different markets

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