Rolling Over Short-Dated Futures Contracts Is the Same as Taking

question 10

Multiple Choice

Rolling over short-dated futures contracts is the same as taking one long-dated futures contract if

• A)The interest rates are constant.
• B)The average change in the spot price is zero over the life of the contract.
• C)There is daily mark-to-market of both the short-dated and long-dated contracts.
• D)The size (notional value)of the open position in the futures does not change over the horizon of the transactions.

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Definitions:

Gross Profit

The difference between revenue and the cost of goods sold before deducting overheads, payroll, taxation, and interest payments.

LIFO

Last In, First Out, an inventory valuation method where the goods purchased or produced last are the first to be expensed.

Tax Rate

The percentage at which an individual or corporation is taxed.

FIFO Method

Stands for "First-In, First-Out," a technique to value inventory and determine the cost of goods sold by assuming that the oldest items are sold first.