Q8. The September 8, 2008 price of platinum on the spot market is $1,350 per ounce. The 1-year US LIBOR rate is 3.13%. An investor holds $270,000 of a risk-free asset (the equivalent of 200 ounces) earning the US LIBOR rate. The theoretical maximum 3-month future price per ounce for platinum would be closest to, and the market for platinum would be described as being in:

          Futures price                  Market

A)     $1,392                     Backwardation

B)     $1,360                     Backwardation

C)     $1,360                      Contango

Q9. An Australian managed futures fund is considering a speculative investment in commodity futures. If the fund is seeking investments with the smallest deviation from their theoretical minimum and maximum values, it would most likely invest in:

A)   neither silver nor energy futures.

B)   energy but not silver futures.

C)   silver but not energy futures.

Q10. Which of the following statements regarding the commodity markets is TRUE?

A)   Speculators can only make profits in the commodity market if the market is in backwardation.

B)   In practice, commodity markets are in contango most of the time.

C)   Speculators can make profits in the commodity markets no matter how the commodity markets are acting.

Q11. Kornelia van Melles is the rather eccentric owner of M’s, an upscale Amsterdam art gallery famous for its rare china and pottery. The gallery has been extremely profitable since its opening 15 years ago, in large part due to Melles’ ability to find unique art pieces and her large network of patrons. While most of her wealth is tied up in the gallery, she has also been able to build up a sizeable investment portfolio. The portfolio, until recently managed by a large investment management firm, was invested mainly in small-cap stocks which suffered significant losses over the past two years. Following a heated debate with her portfolio manager, Melles sold her investments, withdrew the funds and invested the entire proceeds in government treasury bills. The portfolio today is worth

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