An Option Contract Can Best Be Defined As

question 212

Multiple Choice

An option contract can best be defined as:

• A) A forward contract with the feature that gains and losses are realized each day rather than only on the settlement date.
• B) Hedging an asset with contracts written on a closely related, but not identical, asset.
• C) Risk that futures prices will not move directly with cash price hedged.
• D) An agreement by two parties to exchange, or swap, specified cash flows at specified intervals in the future.
• E) An agreement that gives the owner the right, but not the obligation, to buy or sell a specific asset at a specific price for a set period of time.

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Definitions:

Adjusted Trial Balance

An adjusted trial balance is a list of all the accounts of a company, including any adjustments, showing the final balances to be used for preparing financial statements.

Income Statement

Financial statement that displays a company’s revenues and expenses, and ultimately its profit or loss, over a particular period, offering insight into its operational efficiency.

Adjusted Trial Balance

A list of all accounts and their balances after adjustments have been made for errors, accruals, and deferrals, used to verify the balance of debits and credits.

Insurance Policy

An insurance policy is a contract between an insurer and an insured, outlining the terms under which the insurer agrees to compensate the insured for specific losses.