Question 14

A farmer uses a long hedge to price some corn, and at Time 2 has a loss on the futures side of the hedge. Will this farmer have had to meet any margin calls between Time 1 and Time 2?

Group of answer choices

all hedges always result in some margin calls between Time 1 and Time 2

maybe

yes

no

Question 16

A farmer uses a long hedge and has large margin calls during the holding period and still has them at Time 2. Which is true?

Group of answer choices

They would have been better off if they had not hedged, and had just bought the corn at Time 2

Theyre much better off because they hedged

There will be a big gain on the futures side of the hedge

They wont have to satisfy those margin calls because the gain in the cash part of the hedge offset those losses on the futures side

Question 17

If a long hedger makes a profit on the futures part of the hedge, why do we subtract that profit from the cash price paid at Time 2 in order to calculate the net cash price paid?

Group of answer choices

The futures gain has no impact on the net amount that went out of the hedgers pocket at Time 2

The futures gain increases the net amount that went out of the hedgers pocket at Time 2

The futures gain means there would have been no possibility of margin calls between Time 1 and Time 2

The futures gain reduces the net amount that went out of the hedgers pocket at Time 2

Question 18

An option that would have value if you exercised it is

Group of answer choices

in the money

beside the money

at the money

out of the money