Which of the Following Is False About Profits from Futures

question 63

Multiple Choice

Which of the following is false about profits from futures contracts?I) The person with the long position gets to decide whether to exercise the futures contract and will only do so if there is a profit to be made.II) It is possible for both the holder of the long position and the holder of the short position to earn a profit.III) The clearinghouse makes most of the profit.IV) The amount that the holder of the long position gains must equal the amount that the holder of the short position loses.

• A) I only
• B) II only
• C) III only
• D) IV only
• E) I, II, and III

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Definitions:

Positive Externality

Positive Externality occurs when a transaction or activity benefits a third party not directly involved, like the societal benefit of education or vaccinations.

External Benefit

A benefit that an individual or firm confers on others without receiving compensation.

Household Production

The creation of goods and services within a home for personal use, employing family labor and resources.

Child Care

The care and supervision of a child or multiple children at a time, whose ages can range from two weeks to eighteen years. Child care is the action or skill of looking after children by a day-care center, nannies, babysitter, teachers, or other providers.