Financial Futures Have Become an Increasingly Attractive Investment Alternative Since

question 63

Multiple Choice

Financial futures have become an increasingly attractive investment alternative since the Chicago Board of Trade (CBOT) began trading them in 1977,and their hedging function partly accounts for the growth in trading.Which of the following statements concerning financial futures is true?

• A) Financial futures protect the investment portfolio against inflation in the economy.
• B) Investors seek protection against the increasing volatility of interest rates.
• C) Unlike commodity futures, factors that influence price shifts are not supply and demand of the commodity but buyer psychology.
• D) A reason for their popularity is that trading is restricted to government obligations, which reduces risks.
• E) All of the above are true statements

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Definitions:

Return On Total Assets

A financial ratio indicating how effectively a company is using its assets to generate earnings.

Total Assets

The aggregate of all monetary values of everything a company owns or controls, with economic value expected to provide a future benefit.

Stockholders' Equity

The amount of assets remaining in a company after all liabilities have been deducted, essentially representing the owners' claim on the company's assets.

Market Price

is the current price at which an asset or service can be bought or sold in a competitive marketplace.