Which One of the Following Statements Regarding "Basis" Is True

question 35

Multiple Choice

Which one of the following statements regarding "basis" is true?

• A)the basis is the difference between the futuresprice and the spot price.
• B)the basis risk is borne by the hedger.
• C)a short hedger suffers losses when the basis decreases.
• D)the basis increases when the futures price increases by more than the spot price.
• E)A,B and D.

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Definitions:

Financing Activities

Activities that result in changes in the size and composition of the equity capital or borrowings of the company, reflected in the cash flow statement.

Free Cash Flow

Free cash flow represents the amount of cash a company generates after accounting for capital expenditures needed to maintain or expand its asset base.

Productive Capacity

The maximum output or production level that a facility, sector, or economy can sustain over a period.

Payment of Dividends

The distribution of a portion of a company's earnings to its shareholders as determined by the company's board of directors.