1. Andys Food requires 50 tones of frozen cattle meat for its food catering on 1^st December 2022. As of today 1^st April 2022 the frozen cattle meat spot is selling at $20,000 per tone. The risk free interest rate for all maturities is 12% p.a. The storage cost of frozen meat is $600 per tone for every four months to be paid at the end of each period. The frozen cattle meat supplier quoted the 1^st December 2022 forward price to be $23,000 per tone. Calculate the arbitrage profit for each ton of frozen cattle meat (if any).
   1. $0.00
   2. $722.01
   3. $734.26
   4. $2,400.00

2. It is 1^st April today and assuming that your company need to borrow $500,000,000 on 1^st July for next 3 months. You are planning to use the Eurodollar Futures (EF) to hedge the possible change in the Libor rate between now and 1^st July. The July EF is currently trading at 95.33 and if it turns out that on 1^st July the EF is trading at 95.96. There are 92 days between 1^st July to 1^st October. What would be your total interest payment for this borrowing upon the settlement of it on 1^st October?
   1. $5,837,500.00
   2. $5,845,453.75
   3. $4,254,546.25
   4. $4,262,500.00

3. Which of the following statement is true?

1. If all companies in an industry do not hedge, a company is liable increase its cost by hedging.

2. Hedging cannot be done more easily by a companys shareholders than by the company itself.

3. If all companies in an industry hedge, a company in the industry can sometimes reduce its costs by choosing not to hedge.

4. If all companies in an industry do not hedge, a company in the industry can reduce its risk by hedging.

4. The S&P Stock Index is currently stands at 1,455.00 points. The risk-free interest rate is 9 % p.a. (continuous compounding) and the dividend yield on S&P Index is 4% per annum (continuous compounding). The fair forward price of a four-month forward contract on S&P Index should be 1,479.45 points.
   1. True
   2. False