71) Southern Fields has an inventory of 838,000 pounds of sugar. The firm placed a partial hedge
on this inventory by selling 6 futures contracts at 9.56. The futures contracts are based on
112,000 pounds and quoted in cents per pound. At the time the firm sold the sugar, the spot rate
was 9.63. How much profit did the firm lose because of the hedge?
A) $470.40
B) $586.60
C) $688.20
D) $4,704.00
E) $5,866.00
72) The T-Shirt Factory purchased 8 futures contracts on cotton at a quoted price of 64.50 as a
hedge against its inventory needs. At the time it actually needed the cotton, the spot price was
65.10. Cotton futures are based on 50,000 pounds and quoted in cents per pound. How much did
the Shirt Factory save by hedging cotton?
A) $90
B) $560
C) $1,280
D) $2,400
E) $3,000
73) Will purchased 3 futures contracts on corn. The contract size is 5,000 bushels and the price is
quoted in cents per bushel. Assume the initial margin requirement is 4.5 percent of the contract
value. What is the amount of the initial margin if the futures quote is 624?
A) $140.40
B) $421.20
C) $1,404
D) $2,808
E) $4,212
74) 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?
A) no margin call
B) call for $1,037.50
C) call for $937.50
D) call for $1,100
E) call for $1,287.50
75) Your broker requires an initial margin of $6,100 per futures contract on wheat and a
maintenance margin of $4,400 per contract. Wheat futures contracts are based on 5,000 bushels
and quoted in cents per bushel. You sold one wheat futures contract yesterday at the closing
settlement price quote of 780. Today, the settlement quote is 802. Will you receive a margin call
and if so, for what amount? All margin calls restore the margin level to its initial level.
A) no margin call
B) call for $475
C) call for $1,100
D) call for $4,750
E) call for $11,000
76) 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?
A) no margin call
B) call for $1,425
C) call for $2,487
D) call for $4,650
E) call for $8,000
77) 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?
A) 1314′0
B) 1315′0
C) 1319′0
D) 1322′0
E) 1325′0
78) The spot price on cocoa is $3,540 a ton. The futures price is $3,480 a ton. The basis is
________ and the market is a(n) ________ market.
A) -60; carrying-charge
B) -60; inverted
C) 20; inverted
D) 60; carrying-charge
E) 60; inverted
79) 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.
A) -2.75; carrying-charge
B) -2.75; inverted
C) 1.75; inverted
D) 2.75; carrying-charge
E) 2.75; inverted
80) The spot price for a non-dividend-paying stock is $24. The risk-free rate is 2.8 percent and
the market rate is 10.6 percent. What is the 6-month futures price of this stock if spot-futures
parity exists?
A) $24.33
B) $24.41
C) $24.54
D) $24.59
E) $24.70
81) The 3-month futures price on a non-dividend-paying stock is $31.80. The risk-free rate is 2.5
percent and the market rate is 9.5 percent. What is the spot rate for this stock if spot-futures
parity exists?
A) $31.39
B) $31.43
C) $31.51
D) $31.60
E) $31.78
82) 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?
A) $15.48
B) $15.82
C) $16.01
D) $16.13
E) $16.24
83) The spot rate on a non-dividend-paying stock is $42.30. The risk-free rate is 3.75 percent and
the market rate is 11.50 percent. What is the three-month futures rate if spot-futures parity
exists?
A) $42.14
B) $42.54
C) $42.69
D) $42.82
E) $43.89
84) The 5-month futures price on a non-dividend-paying stock is $44.30. The risk-free rate is 3.0
percent and the market rate is 9.50 percent. What is the spot rate for this stock if spot-futures
parity exists?
A) $42.43
B) $42.71
C) $43.30
D) $43.76
E) $43.99
85) 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?
A) $27.66
B) $27.90
C) $28.02
D) $28.10
E) $28.35
86) 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?
A) $38.27
B) $38.41
C) $38.56
D) $38.61
E) $38.70
87) You purchased 4 DJIA index futures at a price of 17,600. The contract size is $10 times the
level of the index. The futures are maturing today when the price is 17,282. What is the amount
of your profit or loss?
A) -$1,270
B) -$1,408
C) -$12,720
D) -$13,080
E) -$14,260
88) Julie purchased four (4) S&P 500 index futures at a price of 1392. The contract size is $250
times the index value. The futures are maturing today at a price of 1387.50. What is the amount
of her profit or loss?
A) -$3,125
B) -$4,500
C) -$5,625
D) -$13,575
E) -$15,625
89) 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?
A) short 16 contracts
B) short 18 contracts
C) short 23 contracts
D) long 18 contracts
E) long 23 contracts
90) 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?
A) short 28 contracts
B) short 37 contracts
C) long 28 contracts
D) long 37 contracts
E) short 43 contracts
91) 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?
A) 3.37 years
B) 3.67 years
C) 3.87 years
D) 4.12 years
E) 4.37 years
92) The duration of a 3-month Treasury futures contract is 3.46 years. What is the duration of the
underlying Treasury note?
A) 2.98 years
B) 3.11 years
C) 3.21 years
D) 3.36 years
E) 3.48 years
93) You manage a $225 million bond portfolio which has a duration of 6.8 years. You want to
hedge this portfolio with Treasury note futures that have a duration of 7.2 years and a futures
price of 114. 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 do you need to sell to complete this hedge?
A) 1,371 contracts
B) 1,400 contracts
C) 1,550 contracts
D) 1,864 contracts
E) 2,134 contracts
94) 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) 4,667 contracts
B) 4,868 contracts
C) 4,949 contracts
D) 5,183 contracts
E) 5,216 contracts
95) What is the closing value of one December futures contract on wheat?
Contract
Open
High
Low
Close
Dec. Corn. 5,000 bu, cents/bu
620.50
623.50
613.00
617.00
Dec. Wheat. 5,000 bu, cents/bu
750.00
766.00
745.00
752.00
A) $3.76
B) $376.00
C) $37,600
D) $376,000
E) $3,760,000
96) 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.
A) $835.50
B) $968.75
C) $1,000.00
D) $1,171.88
E) $1,220.75
97) The T-Shirt Factory purchased 12 futures contracts on cotton at a quoted price of 55.50 as a
hedge against its inventory needs. At the time it actually needed the cotton, the spot price was
56.10. Cotton futures are based on 50,000 pounds and quoted in cents per pound. How much did
the Shirt Factory save by hedging cotton?
A) $90
B) $560
C) $1,280
D) $2,400
E) $3,600
98) 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.
A) -60; carrying-charge
B) -60; inverted
C) 20; inverted
D) 60; carrying-charge
E) 60; inverted
99) The 4-month futures price on a non-dividend-paying stock is $25.00. The risk-free rate is 2.5
percent and the market rate is 9.0 percent. What is the spot rate for this stock if spot-futures
parity exists?
A) $24.43
B) $24.71
C) $24.30
D) $24.80
E) $24.99
100) You own a portfolio which is valued at $10 million and which has a beta of 1.5. 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 1500?
A) short 30 contracts
B) short 40 contracts
C) long 25 contracts
D) long 30 contracts
E) short 50 contracts