1. It is now October 2014. A company anticipates purchasing 500,000 pounds of copper in August 2016. Contracts with maturity 18 months into the future are considered to have sufficient liquidity to meet the companys needs. One contract is for 20,000 pounds of copper. Which of the following is a feasible hedging strategy?
   1. Long 25 contracts with Sept 2016 maturity
   2. Long 25 contracts with March 2016 maturity, and in Feb 2016 roll over to Sept 2016 maturity contracts.
   3. Long 25 contracts with September 2015 maturity, and in August 2015 roll over to Sept 2016 maturity contracts.
   4. All A, B, and C are feasible strategies
   5. Only B and C are feasible strategies.

2. The S&P 500 index is 1,400. The six-month risk-free rate is 4% per annum and the dividend yield over the next six months is 2% per annum. Estimate the futures price and the initial value of the futures contract. All interest rates and dividend yields are continuously compounded.
   1. Futures price = 1414, Value = 0
   2. Futures price = 1414, Value > 0
   3. Futures price = 1407, Value = 0
   4. Futures price = 1407, Value > 0
   5. None of the above
3. If the futures price is less than the spot price, then
   1. The underlying asset must be a commodity
   2. The underlying asset must be a currency
   3. The underlying asset must be a dividend-paying security
   4. The underlying asset must be either a currency or commodity
   5. The underlying asset can be either a commodity, currency, or dividend-paying security.