Which One of the Following Methods of Setting Prices Would

question 104

Multiple Choice

Which one of the following methods of setting prices would reduce the transactions exposure for both the buyer and seller of a swap contract?

• A) Setting a permanent price at which a commodity will be traded.
• B) Setting the price at the minimum spot price during a given period of time.
• C) Setting the price equal to the spot price on the delivery date.
• D) Using the average market price over a given period of time.
• E) Setting the contract price equal to some percentage, less than 100 percent, of the market price on any given day.

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Definitions:

Capacity

The maximum output that a business can produce under normal conditions over a certain period of time.

Capital

Financial assets or the financial value of assets, such as funds held in deposit accounts, as well as the physical factors of production including machinery and buildings.

Character

In finance, character often refers to one of the "Three Cs" (character, capacity, collateral) used to assess a borrower's creditworthiness, focusing on their reputation for repaying debts.

Financial Reserves

Funds or assets that are set aside to meet future liabilities, contingencies, or unforeseen expenditures.