# chapter 6

Quiz by Beatriz Peregrina Viñolo, updated more than 1 year ago
 Created by Beatriz Peregrina Viñolo over 6 years ago
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### Description

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

## Resource summary

### Question 1

Question
Refer to the table 6.1. What is the approximate annualized lease rate on the 12-month corn forward contract?
• 0.00%
• 2.25%
• 3.92%
• 7.84%

### Question 2

Question
Refer to the table 6.1. What is the approximate annualized lease rate on the 18-month soybean forward contract?
• 0.69%
• 1.52%
• 2.69%
• 3.31%

### Question 3

Question
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?
• 3.75%
• 4.59%
• 5.26%
• 6.37%

### Question 4

Question
Refer to the table 6.1. Which of the following terms most accurately describes the forward curve for soybeans over the next two years?
• Contango
• Backwardation
• Contango and backwardation
• None of the above

### Question 5

Question
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?
• 3.68 cents
• 4.48 cents
• 5.84 cents
• 6.90 cents

### Question 6

Question
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?
• 0.84%
• 1.62%
• 2.30%
• 4.0%

### Question 7

Question
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)?
• 265.19 to 267.19
• 258 to 265.19
• 258 to 267.19
• 247.16 to 265.19

### Question 8

Question
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.
• 2.4%
• 2.1%
• 1.3%
• 0.0%

### Question 9

Question
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?
• Year 1
• Year 2
• Year 3
• Never

### Question 10

Question
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?
• \$0.25
• \$0.35
• \$0.54
• \$0.68

### Question 11

Question
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?
• \$5.808
• \$5.736
• \$5.968
• \$6.006

### Question 12

Question
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?
• \$0.1534
• \$0.1684
• \$0.1772
• \$0.1827

### Question 13

Question
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?
• \$0.35 gain
• \$0.35 loss
• \$1.00 gain
• \$1.00 loss

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