QUESTION 9

1. An oil distributor is planning to sell 100,000 barrels of oil in June (the current future price for June is $38 per barrel) and he wishes to hedge against a possible decline in oil prices. He sold 100 contracts, each contract for 1,000 barrels. Suppose that only three possible prices for oil in June are $36, $38, and $41 per barrel. If at June oil price turns out to be $41 per barrel, whats the revenue from oil sales and profit on the futures?

	A.	Revenue $5,000,000, Profit from futures $0.
	B.	Revenue $9,000,000, Profit from futures -$200,000.
	C.	Revenue $4,100,000, Profit from futures - $300,000.
	D.	Revenue $5,048,000, Profit from futures $0.

1.82 points

QUESTION 10

1. Which of the followed analyses are used to engage in pairs trading?

	A.	Multiple select question.
	B.	Similar Alphas
	C.	Fundamental Similarities in the companies
	D.	No of above

1.82 points

QUESTION 11

1. The following data are available relating to the performance of MMM Stock Fund and the market portfolio:

	MMM		Market Portfolio
Average return	16	%		12	%
Standard deviations of returns	26	%		22	%
Beta	1.15			1.00
Residual standard deviation	1	%		0	%

The risk-free return during the sample period was 4%.

Calculate Treynor's measure of performance for MMM Stock Fund.

	A.	0.50
	B.	0.1043
	C.	0.088
	D.	0.44

1.82 points

QUESTION 12

1. You bought a stock at $100 per share and the dividend of the firm is $5 per share. If you plan to hold the stock for two years and then sell at $110, whats your dollar-weighted return?

	A.	9.77%
	B.	13.14%
	C.	5.51%
	D.	15.13%