A company that purchases copper for its production facility is considering hedging its exposure via forward or futures contracts. Which of the following statements is false?

1. For a given maturity, futures and forward prices are likely to be approximately equal.
2. A futures position is more likely to expose the company to liquidity problems than an otherwise equivalent forward position.
3. A forward position is more likely to experience losses from counterparty default if the price of copper rises.
4. A futures hedge will incur losses if the basis (spot price-futures price) increases.
5. None of the above.

Group of answer choices

D

B

A

E

C