The User of a Commodity Who Is Trying to Insure

question 26

Multiple Choice

The user of a commodity who is trying to insure against the price of the commodity rising would:

• A) take the short position in a futures contract.
• B) take the long position in a futures contract.
• C) be better off speculating on price movements and earning higher profits.
• D) want to hedge by selling a futures contract.

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Definitions:

Sampling Distribution

The probability distribution of a given random-sample-based statistic, used to make inferences about a population.

Mean

The arithmetic average of a set of numbers, calculated by adding all the values together and dividing by the number of values.

Number of Successes

This term refers to the count of times an outcome of interest occurs in a statistical experiment.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values.