exam 4 study Guide

The Country Farm and the Cereal Maker met today and agreed to exchange wheat six months from now at a price which they negotiated today. This agreement was made between the two firms and did not pass through an organized exchange. Which one of the following best describes this transaction? es contract market market rd contract e.CME transaction Correct Answers rd contract See Section 14.1 An investor who shifts risk is referred to as which one of the following? r seller lator r r Correct Answers r Assume the futures price of a commodity is equal to the future value of the cash price, calculated at the risk-free rate. Given this, which one of the following terms applies to the market for this commodity? ive basis equilibrium d market ted market equilibrium -futures parity Correct Answers -futures parity Which of the following are needed to determine the number of stock index futures required to cross-hedge a stock portfolio?I. standard deviation of the stock portfolioII. beta of the stock portfolioIII. value of the index futures contractIV. value of the stock portfolio a.I and III only b.II and IV only c.I, II, and III only d.II, III, and IV only e. I, III, and IV only Correct Answers d.II, III, and IV only What is the 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. Contract Open High Low Close Jun, 5 Yr. Treasury note 112'067 112'126 111'175 111'250 a.$428.13 b.$512.08