7..

1.

Which of the following is not the reason for Basic risk of hedging using futures?

Select one:

a. The hedger may not be certain of the exact date the asset will be bought or sold

b. The asset whose price is to be hedge may not be exactly the same as the underlying asset of the futures contract

c. The hedger may require the futures contract to be closed before its delivery month

d. The asset whose price is to be hedge may not be exactly the same as the price of the futures contract

2.

Which of the following definitions best describes a long hedge using futures?

Select one:

a. A hedge that involves a long position in futures contract when the hedger already owns the underlying asset and expect to buy more of it in the future.

b. A hedge that involves a long position in futures contract when the hedger is going to buy the underlying asset in the future.

c. A hedge that involves a long position in futures contract when the hedger already owns the underlying asset and expect to sell it in the future.

3.

Drag the correct missing word into the text:

If the asset to be hedged and the asset underlying the futures contract are the same, the basis should be _______ at the expiration of the futures contract.

4.

Drag the right missing component into the formula:

Basic = ( ) Futures price of contract used

select one

a. spot price of asset to be hedged

b. forward price of contract used

c. spot price of contract used

5.

Drag the correct missing words into the text:

The minimum variance hedge ratio depends on the relationship between changes in ______ and changes in futures price.

6.

Which of the following statement is false?

Select one:

a. Hedging using futures always ends up at a better outcome compared to the investors situation without hedge

b. The outcome of hedging using futures may be better, maybe worse than it would have been without hedging

c. Sometimes, the shareholders can do the hedge themselves.

d. None of the above statements is true