Futures Contracts Trade with Every Month as a Delivery Month

question 17

Multiple Choice

Futures contracts trade with every month as a delivery month.A company is hedging the purchase of the underlying asset on June 15.Which futures contract should it use?

• A) The June contract
• B) The July contract
• C) The May contract
• D) The August contract

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Definitions:

Average Fixed Cost

The steady expenditure in manufacturing, divided by the total output generated.

Fixed Costs

Costs that do not change with the level of output or sales, such as rent, salaries, and insurance.

Birthday Cakes

Customarily decorated cakes made to celebrate and serve as a centerpiece during birthday festivities.

Marginal Cost

The increase in total cost that arises from producing one additional unit of a good or service, reflecting the cost of producing that marginal unit.