__________ Occurs When the Futures Price Is Bid Up or Down

question 21

Multiple Choice

__________ occurs when the futures price is bid up or down to the spot price plus carrying costs as the expiration date draws close.

• A)Convergence
• B)Hedging
• C)Strike pricing
• D)Program trading

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Definitions:

Intrinsic Value

The inherent worth of an asset, not necessarily its market price, often calculated through fundamental analysis.

Financial Markets

Marketplaces where individuals and institutions can trade financial securities, commodities, and other fungible items of value at low transaction costs.

Marginal Investor

A marginal investor is a representative investor whose actions reflect the overall market sentiment and whose transactions can affect a security's price.

Common Share

Equity ownership in a company, providing voting rights and entitling the shareholder to a share of the company's success through dividends and/or capital appreciation.