Please write your answers in the spaces provided 1. Suppose the current spot price of oil is $68.75/bbl. The price of a one-year forward contract on oil is $72.50/bbl. The present value of the cost of storing oil for one year is $1.25/bbl. The riskless interest rate is 9.53% (annualized and continuously compounded). Given this information, what is the convenience yield? Please write your calculation next to your answer. Answer: 2. Suppose you run the following regression V=0+1F+ where V is the weekly change in the value of your equity portfolio and F is the weekly change in the value of one S\&P 500 futures contract. The regression results indicate that the estimate of 0 is 162.4 , the estimate of 1 is 220.9 , and the R2 is 0.03 . A. Based on the regression results, how many S\&P 500 futures contracts should you trade in order to optimally hedge your portfolio? Answer: B. Based on the regression results, should you buy or sell S\&P 500 futures contracts in order to optimally hedge your portfolio? Answer: C. After you optimally hedge using S\&P 500 futures contracts, would your portfolio have much risk? (Please just answer "yes" or "no".) Answer: Please write your answers in the spaces provided 1. Suppose the current spot price of oil is $68.75/bbl. The price of a one-year forward contract on oil is $72.50/bbl. The present value of the cost of storing oil for one year is $1.25/bbl. The riskless interest rate is 9.53% (annualized and continuously compounded). Given this information, what is the convenience yield? Please write your calculation next to your answer. Answer: 2. Suppose you run the following regression V=0+1F+ where V is the weekly change in the value of your equity portfolio and F is the weekly change in the value of one S\&P 500 futures contract. The regression results indicate that the estimate of 0 is 162.4 , the estimate of 1 is 220.9 , and the R2 is 0.03 . A. Based on the regression results, how many S\&P 500 futures contracts should you trade in order to optimally hedge your portfolio? Answer: B. Based on the regression results, should you buy or sell S\&P 500 futures contracts in order to optimally hedge your portfolio? Answer: C. After you optimally hedge using S\&P 500 futures contracts, would your portfolio have much risk? (Please just answer "yes" or "no".)