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7. On November 1, 2020 a trader took a long position in three futures contracts on a commodity that expires on March 31, 2021. The
7. On November 1, 2020 a trader took a long position in three futures contracts on a commodity that expires on March 31", 2021. The initial futures price is $60. On December 31, 2020 the futures price is $61. On Feb 28, 2021 it is $64. The contract is closed out on February 28, 2021 What gain is recognized in the accounting year from January 1 to December 31, 20207 Each contract is on 1000 units of the commodity and the transaction qualities to be considered as a hedge. A. SO B. $3,000 C. $9,000 D. $12,000 8. A company has to pay a certain amount of a foreign currency in the future. It decides to hedge with futures contracts. Which of the following best describes the advantage of hedging? A. It leads to a more certain exchange rate being paid by the company. B. It leads to a better exchange rate being paid by the company. C. It caps (sets a maximum price) for the exchange rate that will be paid by the company. D. It provides a floor (sets a minimum price) for the exchange rate that will be paid by the company. 9. A company has a $36 million portfolio with a beta of 1.2. The futures price for a contract on an index is 900. Futures contracts on $250 times the index can be traded. What trade is necessary to reduce beta to 0.9? A. Long 192 contracts B. Short 192 contracts C. Long 48 contracts D. Short 48 contracts
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