1. The initial margin for an S&P 500 contract is 15% of the notional value, while the initial margin for a 10 year Treasury bond contract of similar notional size is 2%. What accounts for the difference in initial margin?
   1. The S&P 500 Index is more volatile than the 10 yr. T-Bill.
   2. The S&P 500 Index has a higher notional value than the 10 yr. T-bill.
   3. The contract size of the S&P 500 Index is larger than the 10 yr. T-bill.
   4. The price of the S&P 500 Index is much larger than the 10 yr. T-bill
   5. This is a mispricing that can be arbitraged away
2. Suppose you observe the spot S&P 500 index at 2,910 and the three month S&P 500 index futures at 2,905. Based on carry arbitrage, you conclude
   1. this futures market is inefficient because the futures price is below the spot price
   2. this futures market is indicating that the spot price is expected to fall
   3. the spot price is too high relative to the observed futures price
   4. the dividend yield is higher than the risk-free interest rate
   5. none of the above