Use this information for Questions 15 to 17. Imagine today is March 1st Speculator Garth notices that today the May corn futures price is $5.00 and the July corn futures price is $6.00. Garth predicts cost of carry to be $0.01 per day and convenience yield to be $0.00 between the expiration of the May and July contracts (assume this time span is 60 days). Garth is very confident in his prediction for coc and y. 15. True or False: Garth believes, based on his prediction of coc and y, the July price is too low compared to the May price. 16. Calculate the actual spread on March 1st: a. $1.00 b. $0.60 C.$0.40 d. $0.01 17. Based on Garth's predictions what spread does Garth think the spread should be on March 1st: a.$1.00 b. $0.40 C. $0.60 d.$0.01 18. What is the primary advantage for a short hedger of trading a short collar versus taking the appropriate position in a futures contract (assume a hedge ratio of 1.00)? a. the short collar eliminates all price uncertainty b. the short collar allows for more upside if prices go up c. the short collar locks in a price and eliminates all price risk 19. A futures contract has an initial margin of $5000 per contract and a maintenance margin of $2500 per contract. How many contacts could a trader control with $100,000 (assuming they commit the entire $100,000) a. 100 b. 1 c. 40 d. 20 20. Suppose it is three days before the May corn futures contract expiration. The spot price is $6.00 and the futures price is $6.02. Cost of carry is $0.01 per day and convenience yield is $0.00 per day, assume coc and y are known with certainty and cannot change in the next three days. Who is in position to benefit from these market conditions? a. corn storage consumers b.corn storage providers c. elves and dwarfs 21. True or False: If you sell a futures contract you have unlimited liability. Use this information for Questions 15 to 17. Imagine today is March 1st Speculator Garth notices that today the May corn futures price is $5.00 and the July corn futures price is $6.00. Garth predicts cost of carry to be $0.01 per day and convenience yield to be $0.00 between the expiration of the May and July contracts (assume this time span is 60 days). Garth is very confident in his prediction for coc and y. 15. True or False: Garth believes, based on his prediction of coc and y, the July price is too low compared to the May price. 16. Calculate the actual spread on March 1st: a. $1.00 b. $0.60 C.$0.40 d. $0.01 17. Based on Garth's predictions what spread does Garth think the spread should be on March 1st: a.$1.00 b. $0.40 C. $0.60 d.$0.01 18. What is the primary advantage for a short hedger of trading a short collar versus taking the appropriate position in a futures contract (assume a hedge ratio of 1.00)? a. the short collar eliminates all price uncertainty b. the short collar allows for more upside if prices go up c. the short collar locks in a price and eliminates all price risk 19. A futures contract has an initial margin of $5000 per contract and a maintenance margin of $2500 per contract. How many contacts could a trader control with $100,000 (assuming they commit the entire $100,000) a. 100 b. 1 c. 40 d. 20 20. Suppose it is three days before the May corn futures contract expiration. The spot price is $6.00 and the futures price is $6.02. Cost of carry is $0.01 per day and convenience yield is $0.00 per day, assume coc and y are known with certainty and cannot change in the next three days. Who is in position to benefit from these market conditions? a. corn storage consumers b.corn storage providers c. elves and dwarfs 21. True or False: If you sell a futures contract you have unlimited liability