The Basis for a 5000 Bushel Wheat Future Is

question 13

Multiple Choice

The basis for a 5000 bushel wheat future is $.50, and the current spot price increases by $.15. A person who owns the asset and is short in the futures market will

• A) neither gain nor lose.
• B) gain $750.
• C) gain $3250.
• D) lose $3250.

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Definitions:

Income Tax Liability

The total amount of income tax owed to the government within a fiscal year.

Tax Rate

The rate at which the government taxes an individual or a corporation.

Excess Amortizations

Amortization amounts exceeding what is needed for the gradual write-off of an asset over its useful life, often indicating accelerated expense recognition.

Accrual-based Net Income

The net income calculated under the accrual basis of accounting, where revenues and expenses are recorded when earned or incurred, not necessarily when cash is received or paid.