Exam 14: Futures Contracts

Which one of the following is a trade that will close out a previously established futures position?

You have 50,000 pounds of cotton in storage.You don't want to sell the cotton today as you believe the price of cotton will be higher six months from now than what the markets currently predict.However,you also realize that the price could decline.Which one of the following would hedge your risk of owning the cotton for the next few months?

Which one of the following is the definition of the term "basis"?

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

A futures position that is equal,but opposite,the position you have in the underlying asset defines which one of the following terms?

You own a portfolio which is valued at $6.4 million and which has a beta of 1.27.You would like to create a riskless portfolio by hedging with S&P 500 futures contracts.The contract size is $250 times the index level.How many futures contracts are needed if the current S&P 500 index is 1406?

An investor who accepts the risk of a loss in exchange for the chance to earn a profit is referred to as which one of the following?

Luke owns a large farming operation which encompasses over 5,000 acres of corn.The crop this year is abundant and will be ready for harvesting next month.Luke likes the market prices today but expects the prices to decline over the next month as the supply of corn increases.Which one of the following positions should Luke take to hedge his corn crop?

You own a portfolio which is valued at $11,190,000 and which has a beta of 1.43.You would like to create a riskless portfolio by hedging using S&P 500 futures contracts.The contract size is $250 times the index level.How many futures contracts do you need to acquire if the current S&P 500 index is 1730?

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?

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

You own 450,000 bushels of wheat.If you decide to add a short futures position in wheat you will be taking which one of the following positions?

The spot price on cocoa is $3,100 a ton.The futures price is $3,180 a ton.The basis is ________ and the market is a(n)________ market.

In which city does the largest volume of futures trading in the United States occur?

What is the closing value of one December futures contract on wheat?

What is the difference between this day's high and closing prices for one 10-year Treasury note futures contract? Treasury note,$100,000,pts and one-half of 1/32 of a point

Jackie manages a $620 million bond portfolio which has a duration of 4.05 years.She wants to hedge the portfolio with Treasury note futures that have a duration of 4.53 years and a futures price of 112.U.S.Treasury notes futures contracts are based on a par value of $100,000 and quoted as a percentage of par.How many contracts does she need to sell to complete this hedge?

You own a diversified investment portfolio and wish to hedge it against market declines.Which one of the following would be best suited as a cross-hedge for this purpose?

The spot price on orange juice is 121.55 cents per pound.The futures price is 124.30.The basis is ________ and the market is a(n)________ market.

Which one of the following terms is defined as the process of recognizing gains and losses on outstanding futures positions on a daily basis?