3. One day, a long position in futures contract receives the daily gain of $5 per contract. Then, a short position in the same contract should see the daily loss of $5 (the gain of -$5) per contract. (a) True (b) False

4. An investor wants to take a long position in futures contract. To start the position, money in the same amount as the futures price should be deposited to the margin account. (a) True (b) False

5. Consider a stock that pays no dividends and currently sells for S0. The forward on this stock for date-T delivery has the forward price F0 that is greater than S0e rT . Suppose that short selling for this stock is NOT allowed in the market. For the forward, we can either long or short. Here, we can make an arbitrage. (a) True (b) False

6. Suppose that we enter a short position in forward on date 0. Because we pay nothing to start the position, the contract value should be zero on date t(> 0). (a) True (b) False

7. Consider a food company that expects to buy corns two years later. As long as the company uses futures on corns, it can eliminate all risks in the payments. (a) True (b) False

8. The spot price of an underlying asset is positively correlated with the risk-free rate. Consider futures and forward contracts on this asset for date-T delivery. Suppose that the contract prices (forward and futures prices) are the same on date 0. Then, the cumulative gain on the futures that we measure on date T tends to be larger than the forward payoff. (a) True (b) False

9. According to the term structure today, the implied forward rate between year 2 and 3 is r0(2, 3). Two years later, the spot rate r2(2, 3) should be the same as the forward rate r0(2, 3). Otherwise, an arbitrage exists. (a) True (b) False

10. The open interest of a certain futures contract is 700 at the end of day t. Next day, 50 contracts are traded for the future. Then, the futures' open interest at the end of day t + 1 can be as low as 650. (a) True (b) False