1. Why are Treasury bills called discount securities? Briefly explain.

2. What are the major difference between money market securities and capital market securities? Briefly describe.

3. When the stock market goes into a panic mode, investors run to Treasury market. Why? Justify the phenomena called flight to quality. Look up chapter 3 and google it.

4. Read the article about Mark Cuban Jr. from my class web site under chapter 3. Describe what option strategy he used to hedge exposure of Yahoo stocks. How did he profit with the strategy? Under what circumstance would you employ such option strategy as Cuban did? Briefly explain.

5. You sell (go short) 10 gold futures contracts at $400 per ounce, where the contract size is 100 ounces. At contract maturity, gold is selling for $410 per ounce. What is your profit (+) or loss () on the transaction?

6. You buy 100 CJC put option contracts with a strike price of 92 at a quoted price of $8. At option expiration, CJC sells for $83.80. What is your net profit on the transaction?

7. You purchase 10 call option contracts with a strike price of $75 and a premium of $3.85. If the stock price at expiration is $82, what is your dollar profit? What if the stock price is $72?

8. You want to find the option prices for ConAgra Foods (CAG). Go to finance.yahoo.com, get a stock quote, and follow the Options link. What are the option premium and strike price for the highest and lowest strike price options that are nearest to expiring? What are the option premium and strike price for the highest and lowest strike price options expiring next month?

9. Go to www.cmegroup.com and find the contract specifications for corn futures. What is the size of the corn futures contract? On the Web site, find the settle price for the corn futures contract that will expire the soonest. If you go long 10 contracts, how much will the corn cost at the current price?