John and Tom Enter into a Futures Contract Where John

question 67

Multiple Choice

John and Tom enter into a futures contract where John agrees to deliver 500 crates of coffee to Tom one year from now. Tom agrees to pay a price of $200 per crate. A year from now, John and Tom find that the market price of coffee is $210 per crate. How might they make a cash settlement on the contract?

• A) John will offer $5,000 to Tom and deliver the 500 crates of coffee.
• B) Tom will offer $5,000 to Tom and deliver the 500 crates of coffee.
• C) John will offer $5,000 to Tom and not deliver any crates of coffee.
• D) Tom will offer $5,000 to John and not deliver any crates of coffee.

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Definitions:

Roll

A document or a list typically used for record-keeping or to account for members in attendance.

Waterfront Restaurant

A dining establishment located adjacent to a body of water, such as a ocean, river, or lake, often featuring scenic views.

Quarts

A unit of liquid capacity equal to two pints or one-fourth of a gallon, used in both the US customary and British imperial systems.

Gallons

A unit of volume measurement used primarily in the United States to measure liquids.