Suppose you sell nine September silver futures contracts at the last price of the day as shown in the table below

Suppose you sell nine September silver futures contracts at the last price of the day as shown in the table below. What will be your profit or loss on this contract if the price turns out to be $12.09 per ounce at expiration? Futures: Silver - 5,000 troy oz, U.S. cents per troy oz.        A.  loss of $25,425 B.  loss of $7,050 C.  loss of $3,025 D.  profit of $3,025 E.  profit of $25,425 Since you sold contracts, you have a short position and thus incur a loss when the price rises. Profit = 9 × 5,000 × ($11.525 - $12.09) = -$25,425 (loss)

62.

Suppose you purchase the November call option on orange juice futures with a strike price of 150 at the price shown in the table below. What will be your profit or loss on this contract if the price of orange juice futures is $0.616 per pound at expiration of the option contract? Futures Options Orange juice: 15,000 lbs, U.S. cents per lb.        A.  loss of $2,107.50 B.  loss of $1,717.50 C.  no profit or loss D.  profit of $1,717.50 E.  profit of $2,107.50 The call will be out of the money at expiration. Loss = initial cost of contract = 15,000 (14.05/100) = $2,107.50

63.

Suppose a financial manager buys call options on 45,000 barrels of oil with an exercise price of $31 per barrel. She simultaneously sells a put option on 45,000 barrels of oil with the same exercise price of $31 per barrel. Her net profit per barrel is _____ if the price per barrel is $29 and _____ if the price per barrel is $35.    A.  -$4; $2 B.  -$2; $0 C.  $0; -$2 D.  $0; $2 E.  -$2; $4 At $29: Value of call option position = $0; Value of put option position = -$2; Total = -$2 At $35: Value of call option position = $4; Value of put option position = $0; Total = $4

64.

Suppose your firm produces breakfast cereal and needs 65,000 bushels of corn in December for an upcoming promotion. You would like to lock in your costs today because you are concerned that corn prices might go up between now and December. To hedge your risk exposure, you could purchase corn futures contracts today effectively locking in a total settlement price of _____, based on the closing price shown in the table below. Futures: Corn - 5,000 bu., U.S. cents per bu.        A.  $163,800 B.  $164,125 C.  $174,238 D.  $179,400 E.  $183,463 Number of contracts needed = 65,000/5,000 = 13 contracts Contract value = 5,000 x (276/100) = $13,800 Total settlement price = 13 x $13,800 = $179,400