At the Beginning of March 2012, Brian Told Chris That

question 15

Multiple Choice

At the beginning of March 2012, Brian told Chris that he is thinking of buying some shares of Ford motors from him at the end of the month at $12/share. Chris agreed to this proposal and wrote a contract to sell shares to Brian at a price of $12/share. The current market price is $10/share. At the end of the month, the share price was $11/share, so Brian chose not to buy the shares from Chris. This is an example of:

• A) a forward contract.
• B) an option.
• C) a future contract.
• D) a swap.

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Definitions:

Fed

Informally refers to the Federal Reserve System, the central banking system of the United States, responsible for monetary policy.

Credit Availability

The ease with which individuals or businesses can obtain loans or access credit from financial institutions.

Military-Industrial Complex

A concept referring to the close relationship between a country's military and the defense industry that supplies it, often suggesting influences on national policy.

Federal Funds Rate

The interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight, used by the Federal Reserve to influence economic conditions.