Question 1

You currently have a long position in the 3-month futures market. Which one of the following would be a reverse trade to this position?

Accepted Answer

A) short spot 
B) long spot 
C) short 3-month futures 
D) long 3-month futures 
E) short 6-month futures 
A) short spot 
B) long spot 
C) short 3-month futures 
D) long 3-month futures 
E) short 6-month futures

Question 2

What is the amount of the difference between the highest and the lowest value of a November heating oil contract on this day?
$\begin{array}{llll}
\text { Contact } & \text { Open } & \text {High} & \text {  Low}& \text { Close}\
\text { Nov, Heating oil, 42,000 gal, \$  }&3.6703& 3.7489 &3.6652& 3.7342& \
\text { and cents/gal}\
\text {Nov, Crude oil, 1,000 bbls, \$ and }&\text {122.71} &124.50 &122.70 &124.40 \
\text {  cents/bbl}
\end{array}$

Accepted Answer

A) $3,525.00 
B) $3,515.40 
C) $3,517.72 
D) $3,549.70 
E) $3,554.10 
A) $3,525.00 
B) $3,515.40 
C) $3,517.72 
D) $3,549.70 
E) $3,554.10

Question 3

Which of the following are reasons why commodities may have a negative basis?
I. storage costs
II. seasonal price fluctuations
III. transportation costs
IV. interest costs

Accepted Answer

A) I only 
B) IV only 
C) I and III only 
D) I, II, and III only 
E) I, II, III, and IV 
A) I only 
B) IV only 
C) I and III only 
D) I, II, and III only 
E) I, II, III, and IV

Question 4

What is the difference in the value of one November heating oil contract between this day's opening and closing prices?
$\begin{array}{llll}
\text { Contact } & \text { Open } & \text {High} & \text {  Low}& \text { Close}\
\text { Nov, Heating oil, 42,000 gal, \$  }&3.6703& 3.7489 &3.6652& 3.7342& \
\text { and cents/gal}\
\text {Nov, Crude oil, 1,000 bbls, \$ and }&\text {122.71} &124.50 &122.70 &124.40 \
\text {  cents/bbl}
\end{array}$

Accepted Answer

A) $6.39 
B) $24.948 
C) $2,494.80 
D) $2,683.80 
E) $5,940.00 
A) $6.39 
B) $24.948 
C) $2,494.80 
D) $2,683.80 
E) $5,940.00

Question 5

You currently own a stock portfolio that has a beta of 1.2. If you fully hedge your stock portfolio you will effectively change the portfolio's beta to which one of the following?

Accepted Answer

A) 0 
B) 1 
C) 1 / 1.2 
D) 1.2 
E) 1.22 
A) 0 
B) 1 
C) 1 / 1.2 
D) 1.2 
E) 1.22

Question 6

You are a baker and need to purchase a substantial amount of wheat flour three months from now in preparation for your busy season. Your concern is that the price of wheat will increase substantially before you make your purchase. Which one of the following positions in wheat would be an effective hedge for you?

Accepted Answer

A) long position in spot market 
B) short position in spot market 
C) long position in futures market 
D) short position in futures market 
E) none of these 
A) long position in spot market 
B) short position in spot market 
C) long position in futures market 
D) short position in futures market 
E) none of these

Question 7

By how much did one September futures contract on corn vary during today's trading?
$\begin{array}{llll}
&\text { Contact } & \text { Open } & \text {High} & \text {  Low}& \text { Close}\
\text { Dec. Corn. }&\text { 5,000 bu, cents/bu } & 620.50 & 623.50 & 613.00 & 617.00\
\text { Dec. Wheat, }&\text { 5,000 bu, cents/bu } &804,00 &810.00 &798,50 & 801,00
\end{array}$

Accepted Answer

A) $.105 
B) $1.05 
C) $10.50 
D) $525 
E) $575 
A) $.105 
B) $1.05 
C) $10.50 
D) $525 
E) $575

Question 8

By how much did one September futures contract on wheat vary during today's trading?
$\begin{array}{llll}
&\text { Contact } & \text { Open } & \text {High} & \text {  Low}& \text { Close}\
\text { Dec. Corn. }&\text { 5,000 bu, cents/bu } & 620.50 & 623.50 & 613.00 & 617.00\
\text { Dec. Wheat, }&\text { 5,000 bu, cents/bu } &804,00 &810.00 &798,50 & 801,00
\end{array}$

Accepted Answer

A) $.115 
B) $1.15 
C) $11.50 
D) $115.00 
E) $575.00 
A) $.115 
B) $1.15 
C) $11.50 
D) $115.00 
E) $575.00

Question 9

Your broker requires an initial margin of $6,100 per futures contract on wheat and a maintenance margin of $4,400 per contract. Wheat futures contracts are based on 5,000 bushels and quoted in cents per bushel. You sold one wheat futures contract yesterday at the closing settlement price quote of 780. Today, the settlement quote is 802. Will you receive a margin call and, if so, for what amount? All margin calls restore the margin level to its initial level.

Accepted Answer

A) no margin call 
B) call for $475 
C) call for $1,100 
D) call for $4,750 
E) call for $11,000 
A) no margin call 
B) call for $475 
C) call for $1,100 
D) call for $4,750 
E) call for $11,000

Question 10

Sugar is currently selling for $.201 a pound while the 6-month futures price is $.208. You take a long position in the 6-month sugar futures. Which one of the following prices would cause you the greatest loss if that price turns out to be the actual price of sugar per pound 6 months from now?

Accepted Answer

A) $.198 
B) $.201 
C) $.205 
D) $.208 
E) $.211 
A) $.198 
B) $.201 
C) $.205 
D) $.208 
E) $.211

Question 11

Which one of the following futures contracts is generally used to hedge a bond portfolio?

Accepted Answer

A) S&P 500 index 
B) Eurodollar 
C) U.S. Treasury notes 
D) gold 
E) LIBOR rates 
A) S&P 500 index 
B) Eurodollar 
C) U.S. Treasury notes 
D) gold 
E) LIBOR rates

Question 12

The duration of an interest rate futures contract is equal to the summation of which of the following?
I. duration of the instrument most likely to be used as a cross-hedge
II. duration of the underlying instrument
III. initial length of time of the futures contract
IV. time remaining on the futures contract

Accepted Answer

A) II only 
B) I and II only 
C) I and III only 
D) II and III only 
E) II and IV only 
A) II only 
B) I and II only 
C) I and III only 
D) II and III only 
E) II and IV only

Question 13

The duration of a 3-month Treasury futures contract is 3.46 years. What is the duration of the underlying Treasury note?

Accepted Answer

A) 2.98 years 
B) 3.11 years 
C) 3.21 years 
D) 3.36 years 
E) 3.48 years 
A) 2.98 years 
B) 3.11 years 
C) 3.21 years 
D) 3.36 years 
E) 3.48 years

Question 14

Which one of the following terms is defined as the strategy of monitoring the futures price on a stock index in relation to the value of the underlying index to profit from any parity deviations?

Accepted Answer

A) parity trading 
B) index trading 
C) program monitoring 
D) inverted arbitrage 
E) index arbitrage 
A) parity trading 
B) index trading 
C) program monitoring 
D) inverted arbitrage 
E) index arbitrage

Question 15

Assume the futures price of a commodity is equal to the future value of the cash price, calculated at the risk-free rate. Given this, which one of the following terms applies to the market for this commodity?

Accepted Answer

A) positive basis equilibrium 
B) humped market 
C) inverted market 
D) time equilibrium 
E) spot-futures parity 
A) positive basis equilibrium 
B) humped market 
C) inverted market 
D) time equilibrium 
E) spot-futures parity

Question 16

The spot rate on a non-dividend-paying stock is $15.70. The risk-free rate is 3.15% and the market rate is 10.75%. What is the 3-month futures rate if spot-futures parity exists?

Accepted Answer

A) $15.48 
B) $15.82 
C) $16.01 
D) $16.13 
E) $16.24 
A) $15.48 
B) $15.82 
C) $16.01 
D) $16.13 
E) $16.24

Question 17

Your broker requires an initial margin of $1,500 and a maintenance margin of $1,000 on Treasury note futures. Treasury note futures contracts are based on a $100,000 par value and quoted in points and one-half of 1/32 of a point. You own one Treasury futures contract that had a closing settlement quote of 113′245 yesterday. Today, the settlement quote is 112′265. Your margin balance at yesterday's close was $1,150. All margin calls restore margin levels to their initial level. Will you receive a margin call based on today's settlement quote and, if so, for what amount?

Accepted Answer

A) no margin call 
B) call for $1,037.50 
C) call for $937.50 
D) call for $1,100 
E) call for $1,287.50 
A) no margin call 
B) call for $1,037.50 
C) call for $937.50 
D) call for $1,100 
E) call for $1,287.50

Question 18

Which one of the following terms applies to the amount of money required when a futures position is first bought or sold?

Accepted Answer

A) original deposit 
B) initial margin 
C) spot margin 
D) equity deposit 
E) mark to market 
A) original deposit 
B) initial margin 
C) spot margin 
D) equity deposit 
E) mark to market

Question 19

What is the opening value of one December futures contract on wheat?
$\begin{array}{llll}
&\text { Contact } & \text { Open } & \text {High} & \text {  Low}& \text { Close}\
\text { Dec. Corn. }&\text { 5,000 bu, cents/bu } & 620.50 & 623.50 & 613.00 & 617.00\
\text { Dec. Wheat, }&\text { 5,000 bu, cents/bu } &750,00 &766.00 &745.00 & 752,00
\end{array}$

Accepted Answer

A) $3.75 
B) $376 
C) $3,750 
D) $37,500 
E) $37,600 
A) $3.75 
B) $376 
C) $3,750 
D) $37,500 
E) $37,600

Question 20

When the seller of a futures contract is granted a choice among various assets to deliver, the seller is said to have which one of the following options?

Accepted Answer

A) right-to-choose option 
B) spot or futures option 
C) cheapest-to-deliver option 
D) mark-to-market option 
E) flexible delivery option 
A) right-to-choose option 
B) spot or futures option 
C) cheapest-to-deliver option 
D) mark-to-market option 
E) flexible delivery option

You currently have a long position in the 3-month futures market. Which one of the following would be a reverse trade to this position?

What is the amount of the difference between the highest and the lowest value of a November heating oil contract on this day? Contact Open High Low Close Nov, Heating oil, 42,000 gal, \ 3.6703 3.7489 3.6652 3.7342 and cents/gal Nov, Crude oil, 1,000 bbls, \ and 122.71 124.50 122.70 124.40 cents/bbl

Which of the following are reasons why commodities may have a negative basis? I. storage costs II. seasonal price fluctuations III. transportation costs IV. interest costs

What is the difference in the value of one November heating oil contract between this day's opening and closing prices? Contact Open High Low Close Nov, Heating oil, 42,000 gal, \ 3.6703 3.7489 3.6652 3.7342 and cents/gal Nov, Crude oil, 1,000 bbls, \ and 122.71 124.50 122.70 124.40 cents/bbl

You currently own a stock portfolio that has a beta of 1.2. If you fully hedge your stock portfolio you will effectively change the portfolio's beta to which one of the following?

By how much did one September futures contract on corn vary during today's trading? Contact Open High Low Close Dec. Corn. 5,000 bu, cents/bu 620.50 623.50 613.00 617.00 Dec. Wheat, 5,000 bu, cents/bu 804,00 810.00 798,50 801,00

By how much did one September futures contract on wheat vary during today's trading? Contact Open High Low Close Dec. Corn. 5,000 bu, cents/bu 620.50 623.50 613.00 617.00 Dec. Wheat, 5,000 bu, cents/bu 804,00 810.00 798,50 801,00

Sugar is currently selling for $.201 a pound while the 6-month futures price is $.208. You take a long position in the 6-month sugar futures. Which one of the following prices would cause you the greatest loss if that price turns out to be the actual price of sugar per pound 6 months from now?

Which one of the following futures contracts is generally used to hedge a bond portfolio?

The duration of a 3-month Treasury futures contract is 3.46 years. What is the duration of the underlying Treasury note?

Which one of the following terms is defined as the strategy of monitoring the futures price on a stock index in relation to the value of the underlying index to profit from any parity deviations?

Assume the futures price of a commodity is equal to the future value of the cash price, calculated at the risk-free rate. Given this, which one of the following terms applies to the market for this commodity?

The spot rate on a non-dividend-paying stock is $15.70. The risk-free rate is 3.15% and the market rate is 10.75%. What is the 3-month futures rate if spot-futures parity exists?

Which one of the following terms applies to the amount of money required when a futures position is first bought or sold?

What is the opening value of one December futures contract on wheat? Contact Open High Low Close Dec. Corn. 5,000 bu, cents/bu 620.50 623.50 613.00 617.00 Dec. Wheat, 5,000 bu, cents/bu 750,00 766.00 745.00 752,00

When the seller of a futures contract is granted a choice among various assets to deliver, the seller is said to have which one of the following options?

A Brief History of Risk and Return

The Investment Process

Overview of Security Tips

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Stock Options

Option Valuation

Alternative Investments

Corporate and Government Bonds

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

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Exam 14: Futures Contracts

You currently have a long position in the 3-month futures market. Which one of the following would be a reverse trade to this position?

What is the amount of the difference between the highest and the lowest value of a November heating oil contract on this day? Contact Open High Low Close Nov, Heating oil, 42,000 gal, \ 3.6703 3.7489 3.6652 3.7342 and cents/gal Nov, Crude oil, 1,000 bbls, \ and 122.71 124.50 122.70 124.40 cents/bbl

Which of the following are reasons why commodities may have a negative basis? I. storage costs II. seasonal price fluctuations III. transportation costs IV. interest costs

What is the difference in the value of one November heating oil contract between this day's opening and closing prices? Contact Open High Low Close Nov, Heating oil, 42,000 gal, \ 3.6703 3.7489 3.6652 3.7342 and cents/gal Nov, Crude oil, 1,000 bbls, \ and 122.71 124.50 122.70 124.40 cents/bbl

You currently own a stock portfolio that has a beta of 1.2. If you fully hedge your stock portfolio you will effectively change the portfolio's beta to which one of the following?

By how much did one September futures contract on corn vary during today's trading? Contact Open High Low Close Dec. Corn. 5,000 bu, cents/bu 620.50 623.50 613.00 617.00 Dec. Wheat, 5,000 bu, cents/bu 804,00 810.00 798,50 801,00

By how much did one September futures contract on wheat vary during today's trading? Contact Open High Low Close Dec. Corn. 5,000 bu, cents/bu 620.50 623.50 613.00 617.00 Dec. Wheat, 5,000 bu, cents/bu 804,00 810.00 798,50 801,00

Sugar is currently selling for $.201 a pound while the 6-month futures price is $.208. You take a long position in the 6-month sugar futures. Which one of the following prices would cause you the greatest loss if that price turns out to be the actual price of sugar per pound 6 months from now?

Which one of the following futures contracts is generally used to hedge a bond portfolio?

The duration of a 3-month Treasury futures contract is 3.46 years. What is the duration of the underlying Treasury note?

Which one of the following terms is defined as the strategy of monitoring the futures price on a stock index in relation to the value of the underlying index to profit from any parity deviations?

Assume the futures price of a commodity is equal to the future value of the cash price, calculated at the risk-free rate. Given this, which one of the following terms applies to the market for this commodity?

The spot rate on a non-dividend-paying stock is $15.70. The risk-free rate is 3.15% and the market rate is 10.75%. What is the 3-month futures rate if spot-futures parity exists?

Which one of the following terms applies to the amount of money required when a futures position is first bought or sold?

What is the opening value of one December futures contract on wheat? Contact Open High Low Close Dec. Corn. 5,000 bu, cents/bu 620.50 623.50 613.00 617.00 Dec. Wheat, 5,000 bu, cents/bu 750,00 766.00 745.00 752,00

When the seller of a futures contract is granted a choice among various assets to deliver, the seller is said to have which one of the following options?

A Brief History of Risk and Return

The Investment Process

Overview of Security Tips

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Stock Options

Option Valuation

Alternative Investments

Corporate and Government Bonds

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters