General Knowledge 1

Question 1

The money on deposit to ensure performance of a futures contract is called

*basis
*premium
*margin
*commission

Answer 1

margin

Question 2

A 640-acre section of land is

Answer 2

a square mile

Question 2

Farmer Smith has a debt-to-asset ratio of 55%. His debt-to-equity ratio must be negative.

Answer 2

Greater than 100%

Question 3

The process of finding the future value of a present sum is called:

Answer 3

compounding

Question 4

A firm should shut down in the short-run if it cannot cover its

Answer 4

variable costs

Question 5

Which of the following would cause an increase in the price of an agricultural commodity?

*a decrease in supply with no change in demand
*a decrease in demand with no change in supply
*an increase in supply and a decrease in demand
*all of these

Answer 5

a decrease in supply with no change in demand

Question 6

The best indication that a farmer is making financial progress year-to-year is

Answer 6

an increase in net worth on the balance sheet

Question 7

The ____ tax is often referred to as the “death tax.”

Answer 7

estate

Question 8

How many pounds of 44% protein soybean meal must be mixed with 10% protein wheat to make a ton of 16% protein feed?

Answer 8

353 pounds

Question 9

If a futures option is not “in the money”, the premium is only

Answer 9

intrinsic value

Question 10

If a successful trade agreement between the U.S. and Japan resulted in the tariff on US beef products headed to Japan being reduced by 10% then which of the following statements is correct:

*U.S. beef producers are better off
*Japanese beef producers are worse off
*Japanese beef consumers are better off
*U.S beef consumers are worse off
*All of these

Answer 10

all of these

Question 11

If the price of a commodity increases by 5% and the quantity purchased decreases by 10%, then the demand for this commodity is:

Answer 11

Elastic

Question 12

The selling of a commodity futures contract to protect a producer from price fluctuations in the marketplace at the time the product is sold is called:

Answer 12

hedging

Question 13

A series of periodic payments is called a(n):

Answer 13

annuity

Question 14

To purchase insurance, a person pays a/an

Answer 14

premium

Question 15

The demand for an item with many possible substitutes is ______ than the demand for an item with few substitutes.

Answer 15

More elastic

Question 16

A producer purchases soybean meal to feed to their hogs. They are concerned with the price they have to pay. To hedge the soybean mean purchase, the producer would do which of the following?

*Sell a call option
*Buy a put option
*Buy a futures contract
*Sell a futures contract

Answer 16

Buy a futures contract

Question 17

Agricultural Real Estate is assessed at 12% of its_______.

Answer 17

productive capacity

Question 18

If the price of a commodity is too high, the supply will be greater than demand resulting in a:

Answer 18

surplus

Question 19

A farmer has total assets of $400,000 of which land is $300,000. The farmer’s debt:equity ratio is 3:1. What will the farmer’s debt:equity ratio be if his land goes up in value by 15%?

Answer 19

2.07

Question 20

John invested $4,000 of retirement savings in a load mutual fund. The expected annual rate of return is 6%. How many years will it take for the $4,000 to double? Utilize the Rule of 72 when calculating the answer.

Answer 20

12

Question 21

The person who makes transactions for farmers hedging is ______.

Answer 21

A broker

Question 22

The right to buy an underlying futures contract or publicly traded stock at specific price on a certain date is a/an _______.

Answer 22

call option

Question 23

the holder of this has the right, but not the obligation to take a short position in the futures market.

Answer 23

Put option

Question 24

In futures and options transactions, margins and commissions are paid to the ____.

Answer 24

broker

Question 25

When an increase in production of one enterprise causes a reduction in the production of another enterprise, the two enterprises are said to be:

Answer 25

competitive

Question 26

A farmer has a debt/worth ratio of 1:4. The current liabilities total $15,000 and the noncurrent liabilities total $75,000. What is the value of the assets?

Answer 26

$450,000

Question 27

The deadline for a crop insurance application for soybeans in Missouri is

Answer 27

March 15

Question 28

Missouri agricultural land productivity values are set by:

Answer 28

The Missouri State Tax Commission

Question 29

In Missouri, agricultural land productivity values are:

Answer 29

set every other year

Question 30

To provide protection against wind damage to the farm home, a person should purchase

Answer 30

property insurance

Question 31

How many bushels are in a corn futures contract?

Answer 31

5000

Question 32

The ability of larger firms to be more profitable than smaller firms in the same industry is an example of:

Answer 32

economies of scale

Question 33

A written agreement that specifies that a certain commodity will be delivered at a particular location at a future time for a exact price is a

Answer 33

forward contract

Question 34

Which of the following land characteristics is used to determine an agricultural land's value for Missouri property tax calculation? *the slope of the land *the color of the soil *all of these *the erosion potential of the land *the productivity potential of the land

Answer 34

all of these

Question 35

The difference between the local cash market and the futures market is called:

Answer 35

Basis

Question 35

The process of finding the present value of a future sum is called:

Answer 35

discounting

Question 36

An upward trend in market prices is referred to as a

Answer 36

bull market

Question 37

A farmer is solvent if

Answer 37

she has sufficient assets to cover all debts

Question 38

Jack is considering the purchase of a 200 acre farm. He figures the farm will generate a profit of $32,000 per year. He can get a fixed rate loan on the farm at 4% APR. Using the capitalization approach to value the property, Jack figures he could pay _____/acre for the farm.

Answer 38

4,000

Question 38

The best measure of a firm's ability to make a short-term loan payment is

Answer 38

current ratio

Question 38

When a producer sells with futures contract, the buyer becomes the

Answer 38

risk taker

Question 38

A farm has an assessed value of $165,000. The local property tax levy is $3.96/$100 valuation. How much property tax will be owed this year?

Answer 38

$6534.00

Question 39

An example of a flat tax is

Answer 39

employment tax

Question 40

In Missouri which of the following is not taxed as personal property: *sows *calves between 300-600 lbs *horses *grain stored on farm premises *none of these

Answer 40

grain stored on farm premises

Question 41

How many square feet are in an acre?

Answer 41

43,560

Question 42

A farmer purchases 500-pound feeder steers for $2.20 per pound and plans to sell the steers at 750 pounds. The farmer estimates the total cost of gain to be 60 cents per pound. The nearest breakeven price when the steers are sold at 750 pounds is:

Answer 42

1.67 dollars/pound

Question 43

To protect against a lawsuit where you have caused person injury, you should purchase

Answer 43

liability insurance

Question 44

Using a higher discount rate will cause the present value of future earnings to:

Answer 44

decrease

Question 45

The demand curve shows the relationship between:

Answer 45

price and the quantity demanded