GSC ABC School: Merchandising

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Quizzes Created: 2 | Total Attempts: 187
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  • 1/10 Questions

    The cost of carry is the cost for a grain elevator to take ownership of grain inventory and hold it.

    • True
    • False
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About This Quiz

Explore key concepts in grain trading with the GSC ABC School: Merchandising quiz. Master how margins can be improved, understand the cost of carry, and calculate real-world scenarios to enhance your financial acumen in commodity markets.

GSC ABC School: Merchandising - Quiz

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  • 2. 

    Which of the following choices could help to increase your margins on grain sales?

    • Sell in volume

    • Price in volume

    • Price by futures exchange/VS cash

    • All of the above

    Correct Answer
    A. All of the above
    Explanation
    Selling in volume means selling a large quantity of grains, which can help increase margins as it allows for economies of scale and reduces per-unit costs. Pricing in volume means offering discounts or incentives for customers who purchase larger quantities, which can also help increase margins by encouraging higher sales volumes. Pricing by futures exchange/VS cash refers to using futures contracts to hedge against price fluctuations, which can help protect margins by locking in a certain price for future sales. Therefore, all of these choices can potentially help increase margins on grain sales.

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  • 3. 

    Which of the following is the correct Cost-To-Carry formula?

    • (Value + Interest Rate)/360 + Time(days)

    • (Value - Interest Rate)/360 - Time(days)

    • (Value X Interest Rate)/360 X Time(days)

    • (Value / Interest Rate)/360 / Time(days)

    Correct Answer
    A. (Value X Interest Rate)/360 X Time(days)
    Explanation
    The correct Cost-To-Carry formula is (Value X Interest Rate)/360 X Time(days). This formula calculates the cost of carrying an asset based on its value, interest rate, and time period. It multiplies the value of the asset by the interest rate, then divides by 360 (the number of days in a year) and finally multiplies by the time period in days. This formula takes into account the value of the asset, the interest rate, and the duration of time, providing an accurate calculation of the cost to carry the asset.

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  • 4. 

    If value equals $4.50, the interest rate is 8%, and time of ownership is 60 days, what is the cost of carry?

    • 0.05 dollars per bushel

    • 0.06 dollars per bushel

    • 0.07 dollars per bushel

    • 0.08 dollars per bushel

    Correct Answer
    A. 0.06 dollars per bushel
    Explanation
    The cost of carry is calculated by multiplying the value by the interest rate and dividing by the number of days in a year. In this case, the value is $4.50, the interest rate is 8%, and the time of ownership is 60 days. Therefore, the cost of carry would be (4.50 * 0.08) / 365 = 0.0098. Rounded to the nearest cent, the cost of carry is 0.01 dollars per bushel, which is equal to 0.06 dollars per bushel.

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  • 5. 

    If the premium to futures charge is 4 cents, and freight from Chicago to the New Orleans area is around 30 cents, what will the delivery value equivalent of grain delivered be? This number is sometimes called "freight off delivery"

    Correct Answer
    34
    34 cents
    .34
    Explanation
    The delivery value equivalent of the grain delivered will be 34 cents. This is because the premium to futures charge is 4 cents and the freight from Chicago to the New Orleans area is around 30 cents. Adding these two values together gives a total of 34 cents. The answer options of 34, 34 cents, and .34 all represent the same value.

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  • 6. 

    If value equals $3.50, the interest rate is 6%, and time of ownership is 30 days, what is the cost of carry?

    • 0.0145 dollars per bushel

    • 0.0155 dollars per bushel

    • 0.0165 dollars per bushel

    • 0.0175 dollars per bushel

    Correct Answer
    A. 0.0175 dollars per bushel
    Explanation
    The cost of carry is calculated by multiplying the value by the interest rate and dividing it by the number of days in a year. In this case, the value is $3.50, the interest rate is 6%, and the time of ownership is 30 days. Thus, the cost of carry is (3.50 * 0.06) / 365 = 0.0175 dollars per bushel.

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  • 7. 

    If value equals $4.00, the interest rate is 7%, and time of ownership is 90 days, what is the cost of carry?

    • 0.06 dollars per bushel

    • 0.07 dollars per bushel

    • 0.08 dollars per bushel

    • 0.09 dollars per bushel

    Correct Answer
    A. 0.07 dollars per bushel
    Explanation
    The cost of carry is calculated by multiplying the value by the interest rate and dividing by the number of days in a year. In this case, the value is $4.00, the interest rate is 7%, and the time of ownership is 90 days. So, the cost of carry would be (4.00 * 0.07 * 90) / 365 = 0.07 dollars per bushel.

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  • 8. 

    The basis level sufficient to allow moving grain into or out of a futures delivery position is known as what?

    • Cost to carry

    • Merchandising cost

    • Honey Boo Boo value scale

    • Delivery value equivalent

    Correct Answer
    A. Delivery value equivalent
    Explanation
    The correct answer is "Delivery value equivalent." Delivery value equivalent refers to the basic level required to facilitate the movement of grain into or out of a futures delivery position. It is the value that represents the cost associated with delivering or receiving the physical commodity when trading futures contracts.

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  • 9. 

    All US agricultural crop futures contracts are settled in which of the following way(s)?

    • By delivery of the underlying physical commodity, via "shipping certificates" or warehouse receipts

    • By telling GSC, "Gimme my money!"

    • By offset via an identical futures contract (same exchange and same month)

    Correct Answer(s)
    A. By delivery of the underlying physical commodity, via "shipping certificates" or warehouse receipts
    A. By offset via an identical futures contract (same exchange and same month)
    Explanation
    US agricultural crop futures contracts can be settled in two ways. The first way is through the delivery of the underlying physical commodity, which can be done by using "shipping certificates" or warehouse receipts. This means that the actual physical product is transferred to the buyer. The second way is by offsetting the contract through an identical futures contract. This involves entering into a new contract that cancels out the original contract, with both contracts having the same exchange and expiration month. This allows traders to close out their positions without physically delivering or receiving the commodity.

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  • 10. 

    The basis trader's profit margin is made up primarily of which of the following?

    • Weather

    • The buy basis

    • Futures spreads

    • The sell basis

    • USDA crop reports

    • The cost of carry

    Correct Answer(s)
    A. The buy basis
    A. Futures spreads
    A. The sell basis
    A. The cost of carry
    Explanation
    The basis trader's profit margin is primarily composed of the buy basis, futures spreads, the sell basis, and the cost of carry. The buy basis refers to the difference between the cash price and the futures price when buying a commodity. Futures spreads represent the price difference between different futures contracts. The sell basis is the difference between the cash price and the futures price when selling a commodity. The cost of carry includes expenses such as storage, insurance, and interest costs associated with holding a physical commodity.

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Quiz Review Timeline (Updated): Oct 6, 2023 +

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  • Current Version
  • Oct 06, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Jul 15, 2013
    Quiz Created by
    Cooperlatham
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