If August futures for a commodity are currently trading at $9.30/bu, and you expect the basis in July to be $0.25/bu under the August futures, then you expect the July cash price to be:
A. $9.05/bushel under August
B. $9.55/bushel over August
C. $9.05/bushel
D. $9.55/bushel
Ans: C. $9.05/bushel
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Disintermediation refers to the
A) failure of financial intermediaries due to moral hazard problems. B) failure of financial intermediaries due to adverse selection problems. C) movement of savers and borrowers from banks to financial markets. D) removal of government regulations of financial intermediaries.
In the New Keynesian open economy model, government spending
A) is an effective stabilization tool with a flexible exchange rate, and an ineffective stabilization tool with a fixed exchange rate B) is an ineffective stabilization tool with a flexible exchange rate, and an effective stabilization tool with a fixed exchange rate; prices are flexible. C) is an ineffective stabilization tool with a flexible exchange rate, and an ineffective stabilization tool with a fixed exchange rate; net exports depends on the relative price of foreign goods to domestic goods. D) is an effective stabilization tool with a flexible exchange rate, and an effective stabilization tool with a fixed exchange rate.
You offer an extended warranty for your product that is purchased by a few customers. If the product typically fails 2% of the time, the claim rate will exceed 2% of warranty purchasers because
a. adverse selection will lead those who are more reckless to purchase the warranty b. moral hazard will lead those who purchase to be more reckless c. you systematically underestimate product failure rates d. Both A&B
If a consumer purchases more of good B when his income rises, good B is an inferior good
a. True b. False Indicate whether the statement is true or false