1. Consider two investments, the first has equally likely outcomes of $4000, 4500, 5000, 5500. The second has outcomes of $4000 (p=10%), $4500 (p=40%), $5000 (p=40%), $5500 (p=10%).

1. Both investments have the same expected value, but the first's standard deviation is lower than the second's
2. Both investments have the same expected value, but the first's standard deviation is greater than the second's
3. The first investment has a higher expected value and a higher standard deviation
4. The second investment has a higher expected value and a higher standard deviation

2. Yesterday you entered into a short position on 50,000 pounds of copper at $4.60 per pound. The initial margin for the contract is $5,000. Suppose the futures price closes today at $4.51. What is your margin account balance after today's closing?

1. $500
2. $9500
3. $4500
4. -$4500

3. You bought put options on 1500 shares of Ford with a strike of $172.70 for $17.4 The current spot price is $157. What is the option's time value? Intrinsic value?

1. 18.65 and 0
2. 184.80 and 1.85
3. 16.80 and 1.85
4. 1.85 and 16.80

4. Your company produces 50,000 pounds of nickel per month. What would your revenue be if the spot price this month is $6.30 per pound? Suppose you chose to hedge half the amount needed by selling futures at $6.49 per pound, what would your costs be now?

1. 315,000 and 324,500
2. 315,000 and 319,750
3. 315,000 and 162,250
4. 324,000 and 315,000

5. You bought call options on 2,500 shares of Microsoft with a strike of $268.20 for $31.89. The current spot price is $298. What is the option's time value? Intrinsic value?

1. 31.89 and 0
2. 268.20 and -2.09
3. 2.09 and 29.80
4. 29.80 and 2.09