A Swap Contract Can Best Be Defined As

question 257

Multiple Choice

A swap 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:

Maximizing Profits

The process or strategy of adjusting the operations, pricing, and production of a business to generate the highest possible profit margins.

Development Costs

Costs incurred in the design and development phase of a project, often relating to the creation of new products or services.

Variable Costs

Expenses that change in proportion to the level of production or business activity.

Sales Commissions

The payment made to sales personnel, often calculated as a percentage of the sales they generate, as a reward for their efforts in selling products or services.