Exam 15: Commodities and Financial Futures

You, a farmer, anticipate taking 80,000 bushels of soybeans to the market in three months. The current cash price for soybeans is $5.85. The size of the futures contract is 5,000 bushels per contract, and the current three-month futures price is $5.88. If you wanted to hedge one-half of your exposure to a drop in the value of soybeans, how many futures contracts would you buy or sell?

An investor may be asked to put up more margin if:

Because of price movement limitations, the commodities market is not always in equilibrium.

Treasury bond futures trade on the New York Stock Exchange.

If a $100,000 Treasury bond futures contract changes by 15/32, what is the dollar change?

Assume you have just purchased a corn futures contract for 5,000 bushels at $3.24 per bushel. What will your percentage profit on the cash investment be if the price of corn rises $.10 per bushel in 4 months? Your initial margin requirement was $1,500.

The settle price is the same as the:

A banker who is paying a fixed 6% rate on CDs for the next two years, and is afraid interest rates may go down on new loans, may hedge this exposure with interest rate swaps by:

As in the stock and bond markets, interest is paid on a margined commodity contract.

The high risk in commodities contracts is due primarily to the volatility of price movements.

The primary difference between options and futures is that:

In what city are the two largest commodities exchanges?

The interest rate futures market includes all of the following except:

In the futures market, the yen may strengthen against the dollar for all of the following reasons except:

Which of the following is not one of the primary categories of commodities?

Which of the following exchanges is more important within the financial futures market?

Speculators are not significant participants in the commodities markets.

As opposed to a farmer, a miller (processor of wheat) is likely to go __________ in the futures market.

Which of the following is not a major category of financial futures?

Using paper gains to expand the number of contracts outstanding is referred to as: