chapter 6

Question 1 of 13

1

Refer to the table 6.1. What is the approximate annualized lease rate on the 12-month corn forward contract?

Select one of the following:

0.00%
2.25%
3.92%
7.84%

Explanation

Question 2 of 13

1

Refer to the table 6.1. What is the approximate annualized lease rate on the 18-month soybean forward contract?

Select one of the following:

0.69%
1.52%
2.69%
3.31%

Explanation

Question 3 of 13

1

Refer to the table 6.1. If wheat farmers expect a return of 8.0% on their investment in wheat, what is the approximate implied increase in wheat commodity prices over the next 6 months?

Select one of the following:

3.75%
4.59%
5.26%
6.37%

Explanation

Question 4 of 13

1

Refer to the table 6.1. Which of the following terms most accurately describes the forward curve for soybeans over the next two years?

Select one of the following:

Contango
Backwardation
Contango and backwardation
None of the above

Explanation

Question 5 of 13

1

Refer to the table 6.1. Given a lease rate of 7.0% on the 24-month corn forward contract, what is the approximate potential arbitrage profit per contract?

Select one of the following:

3.68 cents
4.48 cents
5.84 cents
6.90 cents

Explanation

Question 6 of 13

1

Refer to the table 6.1. The lease rate on the 6-month soybean contract is 0.35%. What is the implied annual storage cost if the cost is continuously paid and proportional?

Select one of the following:

0.84%
1.62%
2.30%
4.0%

Explanation

Question 7 of 13

1

The spot price of gasoline is 258 cents per gallon and the annualized risk free interest rate is 4.0%. Given a lease rate of 1.0%, a continuously paid storage rate of 0.5%, and a convenience yield of 0.75%, what is the no-arbitrage price range of a 1-year forward contract (in cents)?

Select one of the following:

265.19 to 267.19
258 to 265.19
258 to 267.19
247.16 to 265.19

Explanation

Question 8 of 13

1

Nine-month gold futures are trading for $1565 per ounce. The spot price is $1509 per ounce. LIBOR during each of the upcoming 4 quarters is listed as 1.04%, 1.22%, 1.30%, and 1.35%, respectively. Calculate the 9-month lease rate on the futures contract.

Select one of the following:

2.4%
2.1%
1.3%
0.0%

Explanation

Question 9 of 13

1

Forward prices for gold, in dollars per ounce, for the next five years are 1350, 1400, 1560, 1675, and 1756, respectively. A mine can be opened for 3 years at a cost of $2,000. Annual mining costs are a constant $500 and interest rates are 5.0%. When should the mine be opened to maximize NPV?

Select one of the following:

Year 1
Year 2
Year 3
Never

Explanation

Question 10 of 13

1

The 6-month futures price for oil is $96.60 per barrel (or 2.30 cents per gallon). The 6-month futures prices for gasoline and heating oil are 2.50 cents and 2.15 cents, respectively. What is the gross margin on a simple 3-2-1 crack spread?

Select one of the following:

$0.25
$0.35
$0.54
$0.68

Explanation

Question 11 of 13

1

The spot price of corn is $5.85 per bushel. The opportunity cost of capital for an investor is 0.5% per month. If storage costs of $0.04 per bushel per month are factored in, all else being equal, what is the likely price of a 4-month forward contract?

Select one of the following:

$5.808
$5.736
$5.968
$6.006

Explanation

Question 12 of 13

1

The spot price of corn is $5.82 per bushel. The opportunity cost of capital for an investor is 0.6% per month. If storage costs of $0.03 per bushel per month are factored in, all else being equal, what is the future value of storage costs over a 6-month period?

Select one of the following:

$0.1534
$0.1684
$0.1772
$0.1827

Explanation

Question 13 of 13

1

Oil is selling at a spot price of $42.00 per barrel. Oil can be stored at a cost of $0.42 per barrel per month. The opportunity cost of capital is 7.2% per year (or 0.6% per month). What is the gain or loss realized by an oil refinery that floats its exposure and purchases oil on the spot market in 2 months at a price of $43.00 per barrel, instead of hedging with a forward contract?

Select one of the following:

$0.35 gain
$0.35 loss
$1.00 gain
$1.00 loss

	Created by Beatriz Peregrina Viñolo almost 10 years ago

Quiz on chapter 6, created by Beatriz Peregrina Viñolo on 30/11/2014.

Question 1 of 13

Refer to the table 6.1. What is the approximate annualized lease rate on the 12-month corn forward contract?

Select one of the following:

Explanation

Question 2 of 13

Refer to the table 6.1. What is the approximate annualized lease rate on the 18-month soybean forward contract?

Select one of the following:

Explanation

Question 3 of 13

Refer to the table 6.1. If wheat farmers expect a return of 8.0% on their investment in wheat, what is the approximate implied increase in wheat commodity prices over the next 6 months?

Select one of the following:

Explanation

Question 4 of 13

Refer to the table 6.1. Which of the following terms most accurately describes the forward curve for soybeans over the next two years?

Select one of the following:

Explanation

Question 5 of 13

Refer to the table 6.1. Given a lease rate of 7.0% on the 24-month corn forward contract, what is the approximate potential arbitrage profit per contract?

Select one of the following:

Explanation

Question 6 of 13

Refer to the table 6.1. The lease rate on the 6-month soybean contract is 0.35%. What is the implied annual storage cost if the cost is continuously paid and proportional?

Select one of the following:

Explanation

Question 7 of 13

The spot price of gasoline is 258 cents per gallon and the annualized risk free interest rate is 4.0%. Given a lease rate of 1.0%, a continuously paid storage rate of 0.5%, and a convenience yield of 0.75%, what is the no-arbitrage price range of a 1-year forward contract (in cents)?

Select one of the following:

Explanation

Question 8 of 13

Nine-month gold futures are trading for $1565 per ounce. The spot price is $1509 per ounce. LIBOR during each of the upcoming 4 quarters is listed as 1.04%, 1.22%, 1.30%, and 1.35%, respectively. Calculate the 9-month lease rate on the futures contract.

Select one of the following:

Explanation

Question 9 of 13

Forward prices for gold, in dollars per ounce, for the next five years are 1350, 1400, 1560, 1675, and 1756, respectively. A mine can be opened for 3 years at a cost of $2,000. Annual mining costs are a constant $500 and interest rates are 5.0%. When should the mine be opened to maximize NPV?

Select one of the following:

Explanation

Question 10 of 13

The 6-month futures price for oil is $96.60 per barrel (or 2.30 cents per gallon). The 6-month futures prices for gasoline and heating oil are 2.50 cents and 2.15 cents, respectively. What is the gross margin on a simple 3-2-1 crack spread?

Select one of the following:

Explanation

Question 11 of 13

The spot price of corn is $5.85 per bushel. The opportunity cost of capital for an investor is 0.5% per month. If storage costs of $0.04 per bushel per month are factored in, all else being equal, what is the likely price of a 4-month forward contract?

Select one of the following:

Explanation

Question 12 of 13

The spot price of corn is $5.82 per bushel. The opportunity cost of capital for an investor is 0.6% per month. If storage costs of $0.03 per bushel per month are factored in, all else being equal, what is the future value of storage costs over a 6-month period?

Select one of the following:

Explanation

Question 13 of 13

Select one of the following:

Explanation