James Draws a Check on His Account at Harper Bank

question 3

Multiple Choice

James draws a check on his account at Harper Bank payable to the order of Terry. James does not ask Harper Bank to accept or certify the check. If Harper Bank does not pay the check when Terry presents it for payment, then:

• A) Harper Bank is liable to James because it was not asked to accept or certify the check.
• B) James is liable to Terry on the basis of his drawer's obligation.
• C) James transfers his duties as a drawer to the drawee bank, and the bank is liable.
• D) Terry is liable to James because the bank does not pay the check when Terry presents it for payment.

Understand the concept of open interest and its significance in futures markets.

Identify the standardization of futures contracts and its difference from forward contracts.

Recognize basis and basis risk in the context of futures markets hedging.

Understand the mechanics of profit and loss in futures trading.

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Definitions:

Parameter λ

Often used to denote a rate parameter in exponential distributions which quantifies the frequency of occurrence for a given event.

Normally Distributed

A type of distribution for a variable where data are symmetrically distributed around the mean, showing a bell-shaped curve.

Average Balance

The mean amount of money held in an account over a certain period.

Standard Deviation

An index of variability that quantifies the spread of a set of numbers or the dispersion from the average.