A Futures Contract Seller Is Obligated to Deliver 5,000 Bushels

question 38

Multiple Choice

A futures contract seller is obligated to deliver 5,000 bushels of soybeans for $5.00 per bushel at expiration.If soybean futures close at $5.10 the next day, the seller:

• A)Has a profit of $500 thus far on the contract
• B)Has a loss of $500 thus far on the contract
• C)Has no profit or loss, but is still obligated to deliver 5,000 bushels at $5.00
• D)Will receive a cheque for $500 from the buyer of the contract

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Definitions:

Consolidation Worksheet

A financial tool used to merge and organize the financial information of parent and subsidiary companies for reporting purposes.

Gross Profit Rate

A financial ratio that represents the portion of each dollar of revenue that remains after deducting the cost of goods sold, indicating the efficiency of production and pricing.

Equity Method

An accounting technique used by companies to assess the profits earned by their investments in other companies, where the investment gives the investor significant influence over the investee.