The Basis (B_t,T) at Time T Between the Spot Price

question 51

Multiple Choice

The basis (B_t,T) at time t between the spot price (S_t) and a futures contract expiring at time T (F_t,T) is

• A) B_t,T = S_t + F_t,T.
• B) B_t,T = S_t - F_t,T.
• C) B_t,T = S_t * F_t,T.
• D) B_t,T = S_t/F_t,T.
• E) B_t,T = F_t,T/S_t.

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Definitions:

Period Costs

Expenses directly tied to a specific time period, such as rent, utilities, and administrative salaries, and not directly to the production process.

Units Sold

The number of individual items that have been sold over a specified period.

Period Costs

Costs that are not directly related to the manufacturing process and are charged as expenses in the period they arise.

Units Sold

The total quantity of a company's product that was sold during a specified period.