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Related Flashcards
Cards In This Set
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If interst rates increase, prices of bonds that are already outstanding will?
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Decrease
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If interest rates decrease, prices for bonds that are already outstanding will?
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Increase
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An investor is concerned with falling interest rates he will?
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Buy futures
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If a hedger is long the basis, he is?
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Long the actuals or cash commodity
short the futures
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Purpose of a hedge for a user or producer of the commodity who is long the cash commodity?
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Sell futures to protect from major declines in the price of the cash commodity (short hedge)
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Purpose of a hedge for a user or producer of the cash commodity who is short the cash commodity?
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Buy futures to protect from major advances in the price of the cash commodity (long hedge)
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If cash is under futures, the basis is?
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Negative
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If cash is over futures, the basis is?
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Positive
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The more positive the basis?
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The stronger it is
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The more negative the basis is?
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The weaker it is
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A change in basis from 10 under to 9 under, shows that the basis is?
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Strengthening
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A change in basis from 10 over to 9 over shows that the basis is ?
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Weakening
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The difference in price between the cash commodity and the price of the nearest futures delivery month is called the?
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Basis
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The fact that hedged positions can be switched from a month that is about to expire to a more distant month means?
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The hedgers can obtain long tern protection
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Simultaneous purchase of one commodity futures contract against the sale of the same or related futures contract is known as?
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Spread trading
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