1. The futures contract for oil is for delivery of 20 barrels. Today's closing futures price is 30 per barrel. The initial margin is 400 and the maintenance margin is 300 per contract. A trader goes short three contracts at today's closing price. What futures price will give rise to a margin call on the trader's margin account? A. 35.50 B. 31.00 C. 35.00 D. 25.00 E. None of A-D 1. 2. On October 1st a bread producer purchases 100 bushels of wheat at a spot price of 38 per bushel. On September 1st the bread producer had hedged this planned purchase by taking a long position of four contracts in wheat futures at a futures price of 36. Each contract is for 20 bushels of wheat. On October 1st the futures price is 37.50 and the bread producer closes his futures position. What is the bread producer's effective purchase price? A. 36.80 B. 36.00 C. 37.90 D. 37.50 E. None of A-D 2. 3. A bank offers a savings account with a stated annual rate of 15% with monthly compounding. What is the equivalent rate with semi-annual compounding? A. 15.5865% B. 15.4766% C. 14.972% D. 14.851% E. None of A-D 3. 4. On February 1st, Brazil Coffee Farms Inc. decides to hedge its upcoming sale of three hundred pounds of coffee which will take place on March 1st. It uses a hedge ratio of 0.85. It does not use a tailing the hedge adjustment. Each futures contract is for delivery of 50 pounds of coffee. On February 1st the per-pound spot price of coffee is 1.30 and the futures price is 1.34. On March 1st the per-pound spot price of coffee is 1.25 and the futures price is 1.21. What is the effective sales price received by Brazil Coffee Farms Inc. on its coffee sale? A. 1.3510 B. 1.3724 C. 1.3605 D. 1.4123 E. None of A-D 4. 5. Two banks want to trade a 1218 month forward rate agreement. The continuously compounded zero spot rates are: 6 months: 5%, one year: 5.2%,18 months: 5.5%, and two years: 5.4%. What rate will the banks use in their forward rate agreement? A. 6.0% B. 5.9\% C. 6.4% D. 6.1% E. None of A-D 5