Exam 2: Mechanics of Futures Markets

In the corn futures contract, a number of different types of corn can be delivered with price adjustments specified by the exchange) and there are a number of different delivery locations. Which of the following is true? choose one

A hedger takes a long position in an oil futures contract on April 1 2014 to hedge an exposure on September 1 2014. The initial futures price is $60. On June 30 2014, the futures price is $61. On September 1 2014, it is $64. The contract is closed out on September 1 2014. What gain is recognised in the financial year July 1 2013 to June 30 2014? Each contract is on 1,000 barrels of oil. _ _ _ _ _ _

Which of the following is true? choose one)

What is your answer to question 9 if the trader is a speculator rather than a hedger? _ _ _ _ _ _

You sell one December gold futures contract when the futures price is $1010 per ounce. Each contract is on 100 ounces of gold and the initial margin per contract that you provide is $2000. The maintenance margin per contract is $1500. During the next day, the futures price rises to $1012 per ounce. What is the balance of your margin account at the end of the day? _ _ _ _ _ _

Who initiates delivery in a corn futures contract? choose one)

On the floor of a futures exchange, one futures contract is traded where both the long and short parties are closing out existing positions. What is the resultant change in the open interest? choose one

A company enters into a short futures contract to sell 50 000 units of a commodity for 70 cents per unit. The initial margin is $4000 and the maintenance margin is $3000. What is the futures price per unit, above which there will be a margin call? _ _ _ _ _ _

Which of the following is not true? choose one)

An Australian company wishes to sell 1000 bales of cotton if the market price reaches $440 per bale or above. What order should the company place when the current market price for cotton is $380 per bale? __________

A company enters into a long futures contract to buy 1000 barrels of oil at $60 per barrel. The initial margin is $6000 and the maintenance margin is $4000. What oil futures price will allow $2000 to be withdrawn from the margin account? _______

The one-year Canadian dollar forward exchange rate is quoted as 1.0500. What is the corresponding futures quote? Give four decimal places. _ _ _ _ _ _