The Additional Return Earned by Holding a Commodity That Is

question 43

Multiple Choice

The additional return earned by holding a commodity that is in short supply or a nonpecuniary gain from an asset is referred to as

• A)the negative cost of carry
• B)the convenience yield
• C)cash-flow free gains
• D)gains on the underlying
• E)none of the above

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Definitions:

Price Floor

A government or regulatory imposed minimum price for goods or services, intended to prevent prices from falling too low.

Surplus

An excess of income or assets over expenditure or liabilities in a given period, typically referring to profit or a budgetary surplus.

Shortage

A market condition in which the demand for a product exceeds its supply at a particular price.

Market Price

The actual selling price of a good or service in the marketplace, determined by the forces of supply and demand.