FnO L3

At the expiration date of a future contract, the price of the contract should be ...

• higher than the price of the underlying asset.

• less than the price of the underlying asset.

• equal to the price of the underlying asset.

• higher than the spot price.

Select those that take positions in assets or markets WITHOUT taking offsetting positions (You can select more than one)

• Hedgers

• Speculators

• Arbitrageurs

• All of them

Select those that take positions in assets or markets WITH taking offsetting positions (You can select more than one)

• Speculators

• Hedgers

• Arbitragers

• All of them

Sam wants to buy oil next months. Sam is ____ on oil and to hedge he should _____ 1-month oil futures contract.

• long, Long

• Long, Short

• Short, Long

• Short, Short

You find that July oil futures is overpriced compared with oil. How do you implement an arbitrage strategy?

• Long July oil futures

• Short July oil futures

• Long July oil futures and Short oil in the spot market

• Short July oil futures and Long oil in the spot market

• Both 2 and 4 are correct

You are long 1-month futures contracts on oil for RM1000 and then you go short 1-month forward contracts for RM1000. Your net position is ______

• long oil futures

• short oil futures

• No position

• short oil forward and futures

You are long 1-month futures contracts on oil for RM2000 and then you go short 1-month forward contracts for RM1000. Your net position is ______

• long oil futures

• short oil futures

• No position

• short oil forward and futures

Sarah wants to sell her oil next month. Sarah is _____ on oil and to hedge she needs to _____ 1-month oil futures.

• Long, Long

• Long, Short

• Short, Long

• Short, Short

Find the price of a 6-month oil futures if spot price of oil is RM100 per ton. Risk free interest rate = 5% annualized, and storage cost is RM6.00 per ton/year. Assume there is no convenience yield. (Write the price at 2 decimal points)

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