1. In a ___ market, futures prices are ___ on contracts with ___ maturities

a. Backwardation; higher; longer

b. Backwardation; lower; shorter

c. Contango; higher; longer

2. In a ___ market, futures prices are ___ on contracts with ___ maturities

a. Backwardation; higher; longer

b. Backwardation; lower; longer

c. Contango; higher; longer

d. Contango; lower; longer

e. None of the above is completely correct

d. Contango; lower; longer

e. None of the above is completely correct

3. The following trade quotes are for futures contracts on U.S. Treasury bonds. Please carefully

identify your trade data. Calculate your futures profit if you BOUGHT the December T-bond

futures at the LOW and offset your position at the end of the trading day for 98-20. Assume

10 contracts. Contract size is $100,000.

Open

High

Low

Settle

Sep

98-15

99-01

98-07

98-22

Dec

98-10

98-31

98-07

98-20

Mar

98-29

98-29

98-08

98-19

4. Suppose you have a SHORT HEDGE and you plan to maintain your hedge to contract maturity.

The hedged and hedging instruments are identical so that ST = fT. Which of the following

defines your short hedge profit function?

a. S0 fT

b. f0 S0

c. ST S0 fT

d. S0 ST + f0

e. None of the above