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1. A futures contract will have its price adjusted each day of the
contracts life- either up or down, depending on current market
conditions. This is essence of
a. Marketing to market
2. Mark entered into a forward contract to buy 100 shares of Way-
Low Corp. stock at a price of $5 per share in exactly 6 months.
Now, the six-month period has passed. Way-Low Corp. stock is
trading at $7 per share. What are the consequences for Mark?
a. He has gained $200. [(7-5) *100]
3. Which of the following statements about futures contract is wrong?
a. The basis in futures is similar to a basis points in
banks
5. The basis must equal zero at the delivery date for the futures
contract
6. To minimize default risk, futures exchange requires all contracts to
be
a. Mark to market
7. The financial institution that guarantees both sides of a future
trade is called the
a. Clearinghouse
8. The cash price of wheat today is 410 cents per bushel, and the
three-months futures price of the same is 421 cents per bushel.
The basis is (410 421) = -11
9. Which if the following statements about margin requirements is
wrong?
a. The maintenance margin is only required for sellers of
futures contracts
10. A future contract is
a. a marketable obligation to buy or sell a specified
quantity of a particular asset during a given period
for a given price
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25
Futures rate -.02 -.03 -.02 0.01 0.02 0.03 0.04
0.06
.09*1m $90,000
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23