Which one of the following statements regarding basis

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31. Which one of the following statements regarding "basis" is not true? A. the basis is the difference between the futures price and the spot price. B. the basis risk is borne by the hedger. C. a short hedger suffers losses when the basis decreases. D. the basis increases when the futures price increases by more than the spot price. E. none of the above. If you think one asset is overpriced relative to another, you sell the overpriced asset and buy the other one. Difficulty: Difficult 32. Which one of the following statements regarding "basis" is true? If you think one asset is overpriced relative to another, you sell the overpriced asset and buy the other one. Difficulty: Difficult 22-16
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Chapter 22 - Futures Markets 33. If you determine that the S&P 500 Index futures is overpriced relative to the spot S&P 500 Index you could make an arbitrage profit by If you think one asset is overpriced relative to another, you sell the overpriced asset and buy the other one. Difficulty: Moderate 22-17
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Chapter 22 - Futures Markets 34. On January 1, the listed spot and futures prices of a Treasury bond were 93.8 and 93.13. You purchased $100,000 par value Treasury bonds and sold one Treasury bond futures contract. One month later, the listed spot price and futures prices were 94 and 94.09, respectively. If you were to liquidate your position, your profits would be On bonds: $94,000 - $93,250 = $750; On futures: $93,406.25 - $94,281.25 = -$875; Net profits: $750 - $875 = -$125. Difficulty: Difficult 35. You purchased one silver future contract at $3 per ounce. What would be your profit (loss) at maturity if the silver spot price at that time is $4.10 per ounce? Assume the contract size is 5,000 ounces and there are no transactions costs. A. $5.50 profit B. $5,500 profit C. $5.50 loss D. $5,500 loss E. none of the above. $4.10 - $3.00 = $1.10 X 5,000 = $5,500. Difficulty: Moderate 22-18
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Chapter 22 - Futures Markets
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