The Margin Requirement Will Be Lower Than the Standard Requirement

question 23

Multiple Choice

The margin requirement will be lower than the standard requirement on a stock index futures contract when:

• A)the stock market is declining.
• B)the futures are used to hedge a portfolio.
• C)the investor is establishing a speculative position.
• D)None of the above

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Definitions:

Cracks

Thin, linear fractures or separations in materials or geological formations, typically occurring without the displacement of the sides.

Subduction Zone

A zone in which subduction takes place, either referring to the actual downgoing slab and its surroundings or to the region, including Earth’s surface, above the subducting slab.

Mid-Ocean Ridge

A long mountain range on the floor of the ocean, associated with seafloor spreading.

Island Arc

A generally curved belt of volcanic islands above a subduction zone; also used as an adjective to refer to this setting.