Which of the Following Derivative Contract Features Does Not Reduce

question 30

Multiple Choice

Which of the following derivative contract features does not reduce counterparty risk?

• A)Flexible forward contracts
• B)Standardized exchange-listed contracts
• C)Requirements to post margin
• D)Requirement to trade via a clearinghouse

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Definitions:

Ability-to-Pay Principle

A taxation principle that suggests taxes should be levied according to an individual's or entity's ability to pay, implying those with higher income should pay more taxes.

Taxes

Mandatory fiscal contributions or other forms of levies required from taxpayers by governmental bodies to support government expenditures and diverse public costs.

Regressive Tax

A tax system where the tax rate decreases as the taxable amount increases, placing a higher relative burden on lower-income earners.

Excise Tax

A tax levied on the manufacture, sale, or consumption of certain products or activities, often specific to certain goods like tobacco, alcohol, and fuel.