QUESTION 7

Calculate the HEDGE profit on the spot and futures transactions.

		-$2,500,000
		$2,500,000
		-$470,000
		-$2,030,000
		None of the above

1 points

QUESTION 8

Suppose you buy an asset for $70 and sell a futures contract for $72 to hedge this asset. What is your overall hedge profit if, prior to maturity, you sell the asset for $75 and the futures price at that time is $78?

		-$1
		$2
		$1
		-$6
		None of the above

1 points

QUESTION 9

Find the optimal stock index futures hedge ratio if your stock portfolio is currently valued at $2,400,000, the portfolio beta is 1.15 and the S&P 500 futures price is 901.40 with a multiplier of $250. Although impractical, you may round off your answer to 2 decimal places.

		10.65
		12.25
		6,123.80
		None of the above

1 points

QUESTION 10

You bought 8 million gallons of HEATING OIL at $0.45 per gallon. You wish to hedge your spot position with the September HEATING OIL futures contract at the settlement price of $0.4597. The size of one contract is 42,000 gallons. Using a naive hedging approach, how many contracts should you sell?

		About 7,831
		Exactly 42,000
		About 152
		About 186
		Exactly 100