FIN645 CHAPTER 4

Which of the following best describes a commodity?

• A) A financial derivative

• B) A tradable physical or fictitious product

• C) A stock market instrument

• D) A bond contract

What are the two categories of commodities in the traditional definition?

• A) Soft and Hard

• B) Agricultural and Industrial

• C) Livestock and Mineral-based

• D) Agricultural and Currency

Crude Palm Oil (CPO) futures were first traded in Malaysia in which year?

• A) 1970

• B) 1980

• C) 1990

• D) 2000

Which exchange currently handles CPO futures in Malaysia?

• A) KLSE

• B) BMDB

• C) SGX

• D) CME

What is the contract size for a standard CPO futures contract?

• A) 10 tons

• B) 15 tons

• C) 25 tons

• D) 30 tons

Hedgers in the CPO futures market include all EXCEPT:

• A) Producers
  

• B) Processors

• C) Speculators

• D) Refiners

What is the primary objective of hedging in commodity futures?

• A) Maximize profits

• B) Minimize price risks

• C) Increase market volatility

• D) Speculate on market trends

A futures profit is calculated as:

• A) (Selling Price - Buying Price) × Contract Size

• B) Selling Price × Tonnage × Contract Size

• C) (Selling Price - Buying Price) × Number of Contracts × Contract Size

• D) Buying Price × Tonnage × Contract Size

The effective price in hedging is determined by:

• A) Cash price - Futures profit

• B) Net effect ÷ Number of tons

• C) Selling price × Contract size

• D) Futures price + Cash price

A producer anticipating falling prices should:

• A) Buy futures contracts

• B) Sell futures contracts

• C) Hold physical commodity

• D) Ignore the market trend