1. Lucas owns a large farming operation which encompasses over 5,000 acres of corn. The crop this year is abundant and will be ready for harvesting next month. Lucas likes the market prices today but expects the prices to decline over the next month as the supply of corn increases. Which one of the following positions should Lucas take to hedge his corn crop? A. sell in the spot market today B. buy in the spot market today C. buy corn futures D. sell corn futures E. sell in the spot today and take a long position in the futures market 2. Sugar is currently selling for $0.19 a pound while the 12-month futures price is $0.21. You take a short position (i.e. sell futures) in the 12-month sugar futures. Which one of the following prices would cause you the greatest loss if that price turns out to be the actual price of sugar per pound 12 months from now? A. $0.182 B. $0.190 C. $0.210 D. $0.216 E. $0.223

3. On Monday you buy 8 June Gold futures contract for $1,683. One Gold Futures contract is for 100 troy oz. The initial margin requirement is $5,200 per contract. Use the following daily closing price data: At the close of day on Tuesday your cumulative gain/loss on your investment is A. -$1,200 B. -$780 C. $3,200 D. $6,400

E. $9,600

4. A stock is currently selling for $92 a share and has a dividend yield of 3.0%. The risk-free rate is 4.0%. What is the 9-month futures price on this stock? A. $89.26 B. $91.31 C. $92.69 D. $96.79 E. $100.62

\begin{tabular}{|l|cr|} \hline Day & & Settle Price \\ \hline Monday & $ & 1,687 \\ \hline Tuesday & $ & 1,695 \\ Wednesday & $ & 1,681 \\ \hline \end{tabular}