Exam 14: Futures Contracts

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 a trade that will close out a previously established futures position?

You have a market position which allows you to profit when market prices increase but causes you a loss when market prices decline.This position is defined by which one of the following terms?

In 2007,the Chicago Mercantile Exchange merged with which one of the following exchanges?

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.

Sugar is currently selling for $0.201 a pound while the 6-month futures price is $0.208.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?

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

Which one of the following is the definition of maintenance margin?

You own a 6-month futures contract on U.S.Treasury notes.The underlying notes have a duration of 3.87 years.What is the duration of the futures contract?

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

The spot price of corn is $5.85 a bushel.The 3-month futures price of corn is $5.80.Which one of the following best describes this market?

Which one of the following is the strategy of earning risk-free profits by taking advantage of any unusual differences between cash and futures prices?

What price will be used for this day for the mark-to-market per pound on December cotton?

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?

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

A futures price is a price that is negotiated _____ and paid _____.

What is the highest price at which the May coffee futures contract traded during this day?

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

What is the amount of the difference between the highest and the lowest value of a November heating oil contract on this day?

Your broker requires an initial margin of $4,500 per futures contract on soybeans and a maintenance margin of $3,000 per contract.Soybean futures contracts are based on 5,000 bushels and quoted in cents per bushel.Yesterday,you bought 5 soybean futures contracts at the closing settlement price of 1372.Today,the settlement quote is 1340.All margin calls restore margin levels to their initial margin level.Will you receive a margin call and if so,for what amount?