The Purchaser of a Futures Contract

question 15

Multiple Choice

The purchaser of a futures contract

• A) does not have to worry about margin calls since margin loans are not required.
• B) is affected by the daily procedure known as mark- to- market.
• C) is generally required to make a cash deposit of 10 to 20% of the contract price at the time the contract is entered.
• D) is required to obtain a margin loan equal in amount to the cost of the contract minus the cash down payment.

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Definitions:

Long-Run Exchange Rate Risk

The potential for financial loss over time due to fluctuations in foreign exchange rates affecting international investments and transactions.

International Firm

A company that conducts its operations and business activities in more than one country.

Economic Conditions

The state of the economy at a given time, influenced by factors such as GDP growth rates, unemployment levels, and inflation rates.

Short-Run Exposure

The risk faced by companies due to fluctuations in exchange rates that can affect their transactions and finances in the near term.