A Financial Instrument on Which a Futures Contract Is Based

question 44

Multiple Choice

A financial instrument on which a futures contract is based is called which one of the following?

• A)hedged security
• B)short position
• C)long position
• D)speculative asset
• E)underlying asset

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Definitions:

Depreciation Tax Shield

The reduction in income tax expense that results from the depreciation expense on capital assets, allowing companies to save money on taxes.

Marginal Tax Rates

The rate of tax applied to the last dollar of income, which can vary depending on the income level and filing status of an individual or entity.

Straight-Line

A method of calculating depreciation of an asset, where its cost is evenly spread over its useful life.