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Exam 22: Futures Markets

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Question 41

Multiple Choice

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On January 1, the listed spot and futures prices of a Treasury bond were 93.8 and 93.13.You purchased $100,000 par value Treasury bonds and sold one Treasury bond futures contract.One month later, the listed spot price and futures prices were 94 and 94.09, respectively.If you were to liquidate your position, your profits would be a

A) $125 loss.
B) $125 profit.
C) $12.50 loss.
D) $1,250 loss.

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Question 42

Multiple Choice

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You sold one oil future contract at $70 per barrel.What would be your profit (loss) at maturity if the oil spot price at that time is $73.12 per barrel? Assume the contract size is 1,000 barrels and there are no transactions costs.

A) $3.12 profit
B) $31.20 profit
C) $3.12 loss
D) $31.20 loss
E) None of the options are correct.

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Question 43

Multiple Choice

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Given a stock index with a value of $1,200, an anticipated dividend of $45, and a risk-free rate of 6%, what should be the value of one futures contract on the index?

Contango

The buyer of a futures contract is said to have a __________ position, and the seller of a futures contract is said to have a __________ position in futures.

You purchased one wheat future contract at $3.04 per bushel.What would be your profit (loss) at maturity if the wheat spot price at that time were $2.98 per bushel? Assume the contract size is 5,000 bushels and there are no transactions costs.

You bought one soybean future contract at $5.13 per bushel.What would be your profit (loss) at maturity if the wheat spot price at that time were $5.26 per bushel? Assume the contract size is 5,000 bushels and there are no transactions costs.

Speculators may use futures markets rather than spot markets because

Which one of the following statements regarding "basis" is true?

Delivery of stock index futures

Open interest includes

Which of the following is false about profits from futures contracts? I) The person with the long position gets to decide whether to exercise the futures contract and will only do so if there is a profit to be made. II) It is possible for both the holder of the long position and the holder of the short position to earn a profit. III) The clearinghouse makes most of the profit. IV) The amount that the holder of the long position gains must equal the amount that the holder of the short position loses.

Agricultural futures contracts are actively traded on

Who guarantees that a futures contract will be fulfilled?

Given a stock index with a value of $1,100, an anticipated dividend of $27, and a risk-free rate of 3%, what should be the value of one futures contract on the index?

The establishment of a futures market in a commodity should not have a major impact on spot prices because

The process of marking to market

Agricultural futures contracts are actively traded on

Given a stock index with a value of $1,125, an anticipated dividend of $33, and a risk-free rate of 4%, what should be the value of one futures contract on the index?

Interest rate futures contracts are actively traded on the