Futures Contracts Minimize Default Risk by Requiring Traders to Post

question 47

Multiple Choice

Futures contracts minimize default risk by requiring traders to post collateral called ________ when buying or selling commodities using futures contracts.

• A)down payment
• B)marked to market
• C)margin
• D)commission
• E)deposit

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Definitions:

Scrap Value

The calculated resale value of an asset at the end of its period of serviceability.

Reworked Cost

The expenses associated with correcting defective products or redoing a production process to meet quality standards after the initial manufacturing effort.

Financial Advantage

A benefit in economic terms that positions an entity in a more favorable financial situation than others.

Surplus Material

Excess materials that are not required for current production needs and may be sold or reused in future projects.