Which One of the Following Statements Regarding "Basis" Is True?I)

question 44

Multiple Choice

Which one of the following statements regarding "basis" is true?I) The basis is the difference between the futures price and the spot price.II) The basis risk is borne by the hedger.III) A short hedger suffers losses when the basis decreases.IV) The basis increases when the futures price increases by more than the spot price.

• A) I only
• B) II only
• C) III only
• D) IV only
• E) I, II, and IV.

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Definitions:

Posting

The act of recording financial transactions in the appropriate ledger accounts as part of the accounting process.

Analyzing Business Transactions

The process of reviewing, categorizing, and interpreting the financial activities within a business to understand their impact on the financial statements.

Preparing Closing Entries

The procedure of transferring all income statement balances to permanent accounts at the end of an accounting period to prepare for the next period.

Fiscal Year

A one-year period that companies use for financial reporting and budgeting, which does not necessarily align with the calendar year.