If You Sell Twenty-Five $100,000 Futures Contracts to Hedge Holdings

question 63

Multiple Choice

If you sell twenty-five $100,000 futures contracts to hedge holdings of a Treasury security,the value of the Treasury securities you are holding is

• A)$250,000.
• B)$1,000,000.
• C)$2,500,000.
• D)$5,000,000.

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Definitions:

Common Law

A body of legal rules and principles based on court judgments and customs, rather than formal statutes or legislations.

UCC

The Uniform Commercial Code (UCC) is a comprehensive set of laws governing all commercial transactions in the United States, intended to standardize and simplify the law across state lines.

Finance Lease

A type of lease in which it is assumed that the lessee will use the leased asset for the majority of its useful life, often with an option to purchase the asset at the end of the lease term.

Lease Contract

A legal agreement in which one party grants another party the right to use a property or equipment for a specified period in exchange for payment.