1. Basis risk is a concern when:

The maintenance margin requirement is too high.

The date of the cash flow being hedged is different from the maturity date of the contract.

2. The gains and losses from a futures contract ayer the life of the contract will be:

• Approximately equal to zero.
• Approximately equal to the gains and losses from a comparable forward contract.

3. The purpose of using a clearing house arrangement for futures contract is to:

• reduce the volatility of the futures prices.
• minimize the credit risk problems.

4. Which one of the following is true of a futures contract?

The contract is marked to market every trading day

The change in the futures price in any given day is equal to the change in the spot rate.