Discuss What It Means for a Futures Contract to Be

question 51

Essay

Discuss what it means for a futures contract to be marked to market. If you provide an example, assume that the hedger has purchased a 5,000 bushel wheat contract at a price of $6.90 per bushel.

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Definitions:

Marginal Tax Rate

The percentage at which the next dollar earned of taxable income is subjected to tax.

Average Tax Rate

The total amount of taxes paid by an individual or business divided by the taxable income, reflecting the proportion of income paid in taxes.

Flypaper Theory

A concept suggesting that government grants and subsidies stick where they first land, meaning they benefit the entity they're directly given to rather than being efficiently redistributed.

Tax Incidence

The analysis of the effect of a particular tax on the distribution of economic welfare, essentially focusing on who ultimately bears the cost of a tax.