CON 37. VAR(basis)=VARcash price) VAR Futures price Cover a. True b. False 38. A futures hedge is effective if the variante of the basis is larger than the variance of the cash price, a. True b. False 39. Which will provide a larger reduction in basis risk? a. near-month contract b. third-month contract c. fourth-month contract 1117 40. With same commodity futures contract hedging, the basis will be zero at delivery. a. True b. False 41. The number of futures contracts that will provide us with the minimum variance hedge is calculated as: a. cash position size* standardized futures contract size * hedge ratio b. (cash position size * standardized futures contract size) /hedge ratio. c. (cash position size / standardized futures contract size) * hedge ratio 42. When a cash position is over-hedged, we actually have two positions: a. a hedged cash position and a speculative cash position. b. an unhedged cash position and a speculative futures position. c. a hedged cash position and a speculative futures position. 43. When we under-hedge we are on the hedging efficiency frontier. a. True b. False