Series 3 – The National Commodities Futures Test Series 3 – The National Commodities Futures Test Hedging Strategies & Commodity Market Fundamentals

Question 1

A corn farmer who sells corn futures to lock in a sales price is employing a:

Accepted Answer

Short hedge

Answer

Long hedge

Answer

Cross hedge

Answer

Anticipatory hedge

Question 2

A food manufacturer who buys wheat futures to lock in a purchase price is employing a:

Accepted Answer

Long hedge

Answer

Short hedge

Answer

Basis hedge

Answer

Rolling hedge

Question 3

Basis risk in hedging refers to the risk that:

Accepted Answer

The difference between cash and futures prices changes unexpectedly

Answer

Futures prices move against the hedger

Answer

Margin requirements increase

Answer

The futures contract expires before the hedge is needed

Question 4

Which agricultural commodity futures are traded on the Chicago Board of Trade (CBOT)?

Accepted Answer

Corn, soybeans, and wheat

Answer

Crude oil and natural gas

Answer

Gold and silver

Answer

Live cattle and lean hogs

Question 5

A spread trade in futures involves:

Accepted Answer

Simultaneously buying one contract and selling a related contract

Answer

Buying the maximum number of contracts allowed

Answer

Taking only a long position

Answer

Selling a futures contract without owning the underlying commodity

Question 6

Crude oil and natural gas futures are primarily traded on which US exchange?

Accepted Answer

New York Mercantile Exchange (NYMEX)

Answer

Chicago Mercantile Exchange (CME)

Answer

Intercontinental Exchange (ICE)

Answer

Chicago Board of Trade (CBOT)