Figure: Price Changes the Figure (From Global Financial Data

question 82

Multiple Choice

Figure: Price Changes The figure (from Global Financial Data, EIA) illustrates in percentage terms how the price of onions (in gray) and crude oil (in black) fluctuate over time. The price of onions clearly fluctuates more than oil. In 1958, the United States Congress banned future markets on onions. How does this historical fact explain the difference in deviation between oil and onions?

• A) The ban prevented analysts from buying and selling based on the price of onions' current supply and demand.
• B) The ban encouraged speculation on the onion, causing its price to fluctuate widely as different bubbles grew and popped.
• C) The ban destroyed any incentive for market participants to understand the onion industry.
• D) The ban forced market participants to buy and sell based solely on current supply and demand.

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Definitions:

Fair Value Accounting

An accounting approach where companies measure and report the values of their assets and liabilities on the basis of the actual or estimated fair market prices.

Book Value

The net value of a company's assets minus its liabilities, as recorded on its financial statements.

Market Valuations

The process of determining the present value of an asset or a company based on market prices, often used to evaluate the worth of stocks or other securities.

Quick Ratio

A financial metric that assesses a company's ability to pay its current liabilities without relying on the sale of inventory.