For each of the following assets, indicate in the space provided whether the cost of carry model implies that the forward curve should be upward sloping (+), downward sloping (), or could be either upward or downward sloping (?).

______ A non-dividend-paying stock.

______ A coupon-bearing bond.

______ A foreign currency.

______ Natural gas.

For the following questions, please write the correct answer(s) in the space provided. Each part may have zero, one, or more than one correct answer.

______ A perfect hedge locks in a buy (or sell) price equal to

1. The current spot price.

2. The current futures price.

3. A price in between the current spot and current futures prices.

______ Consider a buyer of crude oil who wants to hedge its purchase price in October. The firm buys December futures contracts on oil and will unwind the hedge in October. The firm will buy the same type of oil and in the same delivery location as specified in the futures contract. Which of the following is a relevant source of basis risk?

1. Changes in oil prices.

2. Changes in the storage cost of oil.

3. Changes in the riskless interest rate.

4. Changes in the convenience yield for oil.