Select the CORRECT Statement Regarding Basis Risk Associated with Futures

question 65

Multiple Choice

Select the CORRECT statement regarding basis risk associated with futures.

• A)Basis risk can be completely eliminated.
• B)Although the basis fluctuates over time,it can be precisely predicted.
• C)The basis must be zero on the maturity date of the contract.
• D)A hedge will reduce risk as long as basis fluctuations are positive.

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Definitions:

Partnership Business

A partnership business is a type of business structure where two or more individuals manage and operate a business in accordance with the terms and objectives set out in a partnership agreement.

Partnership Capital

Refers to the total resources contributed by partners to a partnership for the purpose of starting or maintaining the business operations.

Joint Ventures

Business arrangements in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task or project.

Implied Authority

Power that is not explicitly granted but is assumed to be authorized due to the nature of an individual's position or relationship.