The Purpose of a Margin Account for a Futures Contract

question 44

Multiple Choice

The purpose of a margin account for a futures contract is to:

• A) guarantee a minimum margin of profit for the contract holder.
• B) allow futures traders to have more than one contract at once.
• C) provide a cushion for the exchange against defaults on the contract.
• D) hold interest payments until expiration.

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Definitions:

Continuity

The state or quality of being continuous, unbroken, or consistent over time.

Similarity

The state of being alike or sharing common features.

Proximity

In psychology, it refers to the physical or psychological closeness or nearness between people, objects, or ideas.

Top-Down Processing

A cognitive process that starts with the higher-level brain functions to interpret sensory information, based on knowledge, expectations, and context.