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Question(s) / Instruction(s):

1 .Suppose it is currently July. The September futures price is $60 and the December futures price is $68. What does the spread of $8 represent? a. the cost of carry from September to December b. the expected risk premium from July to September c. the cost of carry from July to September d. the expected risk premium from September to December e. none of the above 2. Suppose you buy an asset at $70 and sell a futures contract at $72. What is your profit if, prior to expiration, you sell the asset at $75 and the futures price is $78? a. $1 b. $2 c. -$1 d. -$6 e. none of the above 3. Find the profit if the investor buys a July futures at 75, sells an October futures at 78 and then reverses the July futures at 72 and the October futures at 77. a. -3 b. 2 c. -2 d. 1 e. none of the above

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