ege 1: Long . 2 3 Short 4 5 6 Question 8 (3 points) 7 8 9 Please indicate which position should be taken, long or short, in the following situation. A speculator feels that gold price is going down in next few months. 10 11 12 Long Short 13 14 Question 9 (9 points) The basis in a hedging situation is difference between spot price and future price (ie. S-F). Does a short hedger's position improve or worsen when the basis decreases unexpectedly? Why? Format B I U . Question 10 (14 points) The exercise price of a European call option of a certam stock is $45 The option premium is $2 a. If you are the elder of the call, what is value of the call option on the expiration date given that the market price of the stock is $48 Will you exercise the option