Q1: Choose the correct answer with explanations: i. 2. Which of the following is least likely a function of the financial system? A. To allow financial market participants to trade based on available information. B. To regulate arbitrageurs' profits (excess returns). C. To facilitate borrowing by businesses to fund current operations. ii. 3. Which of the following is most likely a drawback of the forward contract? A. Difficult to exit from contract once entered. B. Long party to deposit initial amount. C. Periodic payments made by the party during contract in case of adverse movements. 4. Which of the following is least likely to be included in a fixed-income securities fund? A. Commercial paper. B. Repurchase agreements. C. Warrants. iv. 5. Peter decides whether to buy, hold, or sell the shares of an index fund based on a predictive macro-economic model that he has created. He hopes to achieve abnormal returns using this model. Which of the following labels most appropriately describe Peter? A. Arbitrageur. B. Information-motivated trader. C. Investor. V. 6. Elena is the owner of a textile company in London. Her company has recently generated revenue by selling jeans to a customer in Pakistan and will be paid in Pakistani Rupees (PKR) in ninety days. Elena is concerned about the possibility of the PKR depreciating more than expected against the UK Pounds (GBP). Therefore, she is planning to sell three-month futures contracts on the PKR. The seller of such contracts generally gains when the PKR depreciates against the GBP. If Elena takes a short position in these future contracts, she would most appropriately be described as a(n): A. hedger. B. investor. C. arbitrageur