Exam 14: Futures Contracts

The 4-month futures price on a non-dividend-paying stock is $23.60.The risk-free rate is 2.25 percent and the market rate is 10.45 percent.What is the spot rate for this stock if spot-futures parity exists?

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

You own six November crude oil futures contracts.What is the settlement value of those contracts at the end of this trading day?

You purchased two futures contracts on soybeans at a price quote of 1344′0.The initial margin requirement is $4,750 per contract and the maintenance margin is $3,500 per contract.The contract quantity is 5,000 bushels and the price quote is in cents per bushel.What is the lowest the price quote can go before you receive a margin call?

Corn is currently selling for $6.15 a bushel while the 3-month futures price is $6.20.Carlos believes that corn will actually sell for $6.45 a bushel 3 months from now.Which one of the following positions in corn should he take today,given this belief?

Which one of the following is a contract managed by an organized exchange that allows a buyer and seller to agree on a price today for an exchange of goods that will occur sometime in the future?

By how much did one September futures contract on wheat vary during today's trading?

A stock is currently selling for $38.50 a share and has a dividend yield of 1.75 percent.The risk-free rate is 3.5 percent.What is the 2-month futures price on this stock?

Explain why some futures contracts are settled in cash while others are not.Provide an example of each.

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?

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?

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

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?

A stock is currently selling for $28 a share and has a dividend yield of 3.2 percent.The risk-free rate is 2.5 percent.What is the 6-month futures price on this stock?

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

You purchased five September wheat futures contracts at the open today and sold those contracts at the close.What is your total profit or loss on these contracts?

You are the chief financial officer (CFO)of a major textile importer.Identify one of the key risks your company faces and explain how you can hedge this risk using futures.

You are trying to value a 3-month futures contract on a stock.The market rate of return is 11.2 percent,the risk-free rate is 3.8 percent,and the dividend yield on the stock is 2.6 percent.The stock is currently selling for $33 a share.What is the value of "T" as used in the formula for computing the future stock price (F_T = S(1 - r)^T)?

What is the absolute price difference on a $100,000,5-year Treasury note futures contract between the high and low prices? Treasury note,$100,000,pts and one-quarter of 1/32 of a point

Which one of the following is a notification to a futures contract holder that additional margin funds are needed?