The Basis on a 1-Year Futures Contract Is 52 Points

question 72

Multiple Choice

The basis on a 1-year futures contract is 52 points.If spot prices do not move and the risk-free term structure of interest rates remains flat and also does not move,then what should be the basis 1-week before expiration?

• A) 1 point
• B) 7 points
• C) 10 points
• D) 52 points

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Definitions:

Hedged Delivery

A strategy used in trading and finance to minimize risk by taking compensating positions in related securities or commodities.

Futures Contracts

Legal agreements to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future.

Profit (Loss)

Profit or loss refers to the financial result that is calculated by subtracting total expenses from total revenues, with profit indicating a positive result and loss indicating a negative result.

Silver

A precious metal with high electrical and thermal conductivity, used in jewelry, silverware, and industrial applications.