Margin Requirements Are Deposits Placed by Investors in Futures Contracts

question 130

True/False

Margin requirements are deposits placed by investors in futures contracts with their respective brokerage firms when they take their position. They are intended to minimize credit risk associated with futures contracts.

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Definitions:

Market Risk

The risk of losses in investments due to market variables such as price changes, interest rates, or currency exchange rates.

Discount Rate

The interest rate used to discount future cash flows of a financial instrument to present value.

Debt-equity Ratio

The metric illustrating the proportionate investment of equity and debt in asset financing for a company.

Treasury Bill

Government debts issued with a maturity of up to one year, offered at a price lower than their face value.