One Use for Futures Markets Is "Price Discovery," That Is,the

question 43

Essay

One use for futures markets is "price discovery," that is,the futures price mirrors the current consensus of the futures price.If the current price of corn is $2.00 a bushel and the cost of carry is 7 percent,explain what an investor would do if the futures price of corn were $2.40.Is the investor at risk?

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Definitions:

Dividend Policy

A company's approach to distributing profits back to its shareholders through dividends.

Capital Gains

The increase in value of an asset or investment over its purchase price, which becomes realized upon the sale of the asset.

Ex-dividend Date

The date on which stocks are traded without the right to receive the next dividend payment, determining who will receive the dividend.

Dividend Payment

A portion of a company's earnings distributed to shareholders, usually on a regular basis.