QUESTION 12

One advantage of using a forward contract instead of a hedge to price grain is

		There is no basis risk on the forward contract
		the margin calls on a forward contract will be less than on a hedge because the elevator is responsible for half the margin calls on forward contracts
		a forward contract allows the farmer to deliver to any elevator, whereas a hedge requires the hedger to deliver to a specific elevator when they lift the hedge
		a forward contract price will usually have a better basis than a hedger would expect to find at Time 2

QUESTION 13

Which is true?

		at the CME, initial margin is 110% of maintenance margin
		at the CME, initial margin is calculated by dividing maintenance margin by 110%
		at the CME, maintenance margin is 110% of initial margin
		at the CME, maintenance margin is calculated by multiplying initial margin by 110%

QUESTION 14

Which is true?

		initial margin is usually slightly less than maintenance margin
		Because initial margin and maintenance margin are usually relatively far apart in terms of dollars, most positions that end up profitable dont receive margin calls at all during the holding period
		Because maintenance margin is a high percentage of initial margin, even a small adverse price move will cause the trader to receive a margin call
		maintenance margin is usually slightly greater than initial margin

QUESTION 15

One advantage of using a forward contract instead of a hedge to price grain is

		There are no margin calls on a forward contract
		a forward contract price will usually have a better basis than a hedger would expect to find at Time 2
		a forward contract allows the farmer to deliver to any elevator, whereas a hedge requires the hedger to deliver to a specific elevator when they lift the hedge
		the margin calls on a forward contract will be less than on a hedge because the elevator is responsible for half the margin calls on forward contracts