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:

Cost-Plus Pricing

A pricing strategy where a fixed percentage or amount of profit is added to the cost of producing a product or delivering a service to determine its selling price.

Manufacturing Situations

Scenarios or contexts within which manufacturing processes take place, often influenced by factors such as technology, labor, and market demand.

Market Forces

The economic factors affecting the price, demand, and availability of products and services in a free market, such as supply and demand, competition, and consumer preferences.

Cost-Based Pricing

A pricing strategy where the selling price is determined by adding a specific markup to a product's cost of production.