If the Futures Price Is Much Higher Than the Spot

question 158

Multiple Choice

If the futures price is much higher than the spot or current price, that is a sign that smart people with their own money on the line think that:

• A) there will be an excess supply in the near future.
• B) supply disruptions may soon occur.
• C) demand will decrease rapidly in the future.
• D) supply will be stable in the near future.

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Definitions:

Cost Of Goods Sold

A financial measure that calculates the cost incurred to produce products sold by a company, including materials and labor.

Gross Profit

The income a business earns once it subtracts the expenses involved in producing and marketing its goods, or the expenses related to delivering its services.

Other Revenue And Expenses

These refer to the income and costs that are not related to the main business activities of a company.

Purchases Account

An account used in the accounting for all goods bought for resale or for use in the production process.