1. Its Sept. 2015. Division A of U.S. Toys Inc. owes 1.5 mil. C$ to a Canadian firm to be paid in February 2016, but another Division B of the U.S. Toys Inc. will receive 2.3 mil. C$ from a different Canadian client also in February 2016. U.S. Toys Inc. plans to transact in spot foreign exchange market to exchange US dollars and Canadian dollars (C$) in February 2016. U.S. Toys Inc. should engage in _______ hedge, hedging ______ million C$ in the futures market.

1. 1. Short; 0.8
   2. Long; 0.8
   3. Short; 2.3
   4. Long; 2.3
   5. Short, 1.5
2. Consider the futures contract on XYZ Inc. stock. Suppose that the annual dividend yield for the stock is 2.5% and the risk-free rate is 6.3%. Both rates are based on continuous compounding. The current futures price of the XYZ Inc. futures contract maturing in 18 months is $900 per share. Assume that the no arbitrage Futures-Spot parity when asset provides a known yield holds. What is the current spot price of XYZ Inc. per share?
3. 1. $934.39
   2. $952.79
   3. $850.13
   4. $900.00
   5. $944.37
4. Consider a 12-months futures contract on silver. Assume no income and that it costs $X per ounce per year to store silver, with payment being made at the end of the year. The spot price is $26 per ounce and the risk free rate is 4% per annum for all maturities, based on continuous compounding. The futures price of the 12-month futures contract on silver is $29 per ounce. Assume that no arbitrage Futures-Spot parity with storage costs holds. The storage cost per ounce per year ($X) is,
5. 1. $2.88
   2. $1.86
   3. $1.94
   4. $3.00
   5. $2.15