A) a long position in the spot market and a simultaneous short position in the futures market. B) a long position in the spot market and a simultaneous long position in the futures market. C) a short position in the spot market and a simultaneous short position in the futures market. D) a short position in the spot market with a simultaneous long position in the futures market. E) none of these. A) a long position in the spot market and a simultaneous short position in the futures market. B) a long position in the spot market and a simultaneous long position in the futures market. C) a short position in the spot market and a simultaneous short position in the futures market. D) a short position in the spot market with a simultaneous long position in the futures market. E) none of these. D

Consider the following: \[\begin{array}{l} \begin{array} { l l r } \text {Risk-free rate in Canada }&0.04 \text { year } \\ \text {Risk-free rate in Switzerland }&0.03 / \text { year } \\ \text {Spot exchange rate }&1.67 \mathrm{SF} / \$ \end{array} \end{array}\] If the futures market price is 1.63 SF/$,how could you arbitrage?

A) Borrow Swiss Franks in Switzerland,convert them to dollars,lend the proceeds in Canada and enter futures positions to purchase Swiss Franks at the current futures price. B) Borrow Canadian dollars in Canada,convert them to Swiss Franks,lend the proceeds in Switzerland and enter futures positions to sell Swiss Franks at the current futures price. C) Borrow Canadian dollars in Canada and invest them in Canada and enter futures positions to purchase Swiss Franks at the current futures price. D) Borrow Swiss Franks in Switzerland and invest them there,then convert back to Canadian dollars at the spot price. E) There is no arbitrage opportunity. A) Borrow Swiss Franks in Switzerland,convert them to dollars,lend the proceeds in Canada and enter futures positions to purchase Swiss Franks at the current futures price. B) Borrow Canadian dollars in Canada,convert them to Swiss Franks,lend the proceeds in Switzerland and enter futures positions to sell Swiss Franks at the current futures price. C) Borrow Canadian dollars in Canada and invest them in Canada and enter futures positions to purchase Swiss Franks at the current futures price. D) Borrow Swiss Franks in Switzerland and invest them there,then convert back to Canadian dollars at the spot price. E) There is no arbitrage opportunity.

Consider the following: \[\begin{array}{l} \begin{array} { l l r } \text {Risk-free rate in Canada }&0.04 \text { year } \\ \text {Risk-free rate in Switzerland }&0.03 / \text { year } \\ \text {Spot exchange rate }&1.67 \mathrm{SF} / \$ \end{array} \end{array}\] What should be the proper futures price for a 1-year contract?

A) 1.703 SF/$ B) 1.654 SF/$ C) 1.638 SF/$ D) 1.778 SF/$ E) 1.686 SF/$ A) 1.703 SF/$ B) 1.654 SF/$ C) 1.638 SF/$ D) 1.778 SF/$ E) 1.686 SF/$

A) maintains that for most commodities,there are natural hedgers who desire to shed risk. B) maintains that speculators will enter the long side of the contract only if the futures price is below the expected spot price. C) assumes that risk premiums in the futures markets are based on systematic risk. D) a and b. E) b and c. A) maintains that for most commodities,there are natural hedgers who desire to shed risk. B) maintains that speculators will enter the long side of the contract only if the futures price is below the expected spot price. C) assumes that risk premiums in the futures markets are based on systematic risk. D) a and b. E) b and c.