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Exam (elaborations)

Fin 470 Exam 2 Study Guide Solutions

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Fin 470 Exam 2 Study Guide Solutions benefits of futures and forwards - Ans:-futures - no counter party risk, standardized implies higher liquidity forwards - customized (date/amount) costs of futures and forwards - Ans:-futures - may not be exactly what you need (set date or amount) - pay b...

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  • October 23, 2024
  • 26
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • 2024/2025
  • 2024/2025
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FIRST PUBLISH OCTOBER 2024




Fin 470 Exam 2 Study Guide Solutions


benefits of futures and forwards - Ans:✔✔-futures


- no counter party risk, standardized implies higher liquidity




forwards


- customized (date/amount)


costs of futures and forwards - Ans:✔✔-futures


- may not be exactly what you need (set date or amount)


- pay broker commissions




forward


- pay banker bid-ask spreads




Page 1/26

, ©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED

FIRST PUBLISH OCTOBER 2024




yesterday, you entered a futures contract (1000) barrels to buy oil at $62 per barrel. Suppose the futures

price closes today at $65. How much have you made/lost?




A. $3,000


B. $2,000


C. -$2,000


D. -$3000


E. none of the above - Ans:✔✔-A. made $3000


- started: $62 x 1000= 62,000


- End: $65 x 1000 = 65,000


yesterday, you entered a futures contract (1000) barrels to SELL oil at $57 per barrel. Suppose the futures

price closes today at $55.50. How much have you made/lost?




A. $2,000


B. $2,500



Page 2/26

, ©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED

FIRST PUBLISH OCTOBER 2024




C. -$2,000


D. -$1,500


E. none of the above - Ans:✔✔-E. none of the above




SELL OIL - want it to go down




start: 57,000


end: 55,500


profit of + $1,500


You use 10000 bushels a month but only enter 1 long contract at 370. If next month's spot price is 400,

what would your costs be without the future? With the future?




A. $40,000; $37,000


B. $40,000; $38,500


C. $37,000; $40,000

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