There Is a Futures Contract for the Purchase of 100

question 13

Multiple Choice

There is a futures contract for the purchase of 100 bushels of wheat at $2.50 per bushel. At the end of the day when the market price of wheat increases to $3.00 per bushel:

• A) the buyer (long position) needs to transfer $50 to the seller (short position).
• B) the seller (short position) needs to transfer $50 to the buyer (long position).
• C) nothing happens since with a futures contract all payments are made at the settlement date.
• D) nothing happens since marked to market adjustments only take place when the market price falls below the contract price.

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Definitions:

Annual

Occurring once every year.

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Domestic units formed by partners of the same sex, legally recognized in many countries and regions.

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