If the Futures Price Is ________ the Theoretical Futures Price

question 27

Multiple Choice

If the futures price is ________ the theoretical futures price (that is, the futures contracts are cheap) , the index fund manager can ________ the indexed portfolio's return by buying the futures and buying the Treasury bills.

• A) less than; enhance
• B) greater than; enhance
• C) greater than; maintain
• D) less than; worsen

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Definitions:

Impose a Tax

The act of a government or authority setting a financial charge or levy upon a taxpayer.

Maximizing Profits

A company's goal to achieve the highest possible return or profit from its operations, often through efficient resource use and strategic planning.

Marginal Social Cost

The comprehensive expense encountered by society to produce one more unit of a good or service, encompassing private expenses as well as any extraneous costs.

Efficient Level

The optimal point at which a particular activity achieves the best output or outcome with the least waste of resources or effort.