Posted by: usset001 | April 14, 2009

A mid-term exam on commodity options

shh!

shh!

I teach a course titled “Agricultural Futures and Options” at the University of Minnesota. I have 50 students in my class and today I am giving them their second mid-term examination. The topic is options and options pricing strategies. Over the next few days, I will post different questions from the exam. How deep is your knowledge of options? Can you pass my test?

 

If you pay a premium of 45 cents per bushel for a $4.40 July corn put, what is the most money you can lose?

  • a. $4.40 per bushel
  • b. 45 cents per bushel
  • c. your potential loss is unlimited
  • d. cannot be determined

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