©GRACEAMELIA 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED
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
Page 3/26
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
Page 3/26
