On 25 February 2008 You Could Have Purchased a Futures

question 43

Multiple Choice

On 25 February 2008 you could have purchased a futures contract from Intrade that would pay you $1 if Barack Obama wins the 2008 Democratic Party nomination. At a price of $0.81, the contract for Obama carried the highest price of any Democratic candidate. This tells you ________.

• A)that the market believed that Obama had 81% chance of winning
• B)that the market believed that Obama had the least chance of winning
• C)nothing about the market's belief concerning the odds of Obama winning
• D)that the market believed Obama's chances of winning were about 19%

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Definitions:

Periodic Inventory System

A method of inventory management where updates to inventory levels are made at specific intervals, typically at the end of an accounting period, rather than continuously.

Inventory Shipped on Consignment

Goods sent by a vendor (consignor) to a consignee, which are held by the consignee until sold; the consignor retains ownership until the goods are sold.

Consignee

The individual or entity that is legally permitted to receive goods but does not have ownership rights over the cargo until the consignment is paid for or sold.