Delivery of Stock Index Futures

question 21

Multiple Choice

Delivery of stock index futures

• A) is never made.
• B) is made by a cash settlement based on the index value.
• C) requires delivery of 1 share of each stock in the index.
• D) is made by delivering 100 shares of each stock in the index.
• E) is made by delivering a value-weighted basket of stocks.

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Definitions:

Investment

Allocating resources, usually money, with the expectation of generating an income or profit.

Cash Flows

The total amount of money being transferred in and out of a business, particularly in relation to liquidity.

Payback Period

The amount of time it takes to recover the cost of an investment through its cash inflows.

Payback

The method of calculating the duration required to recover the cost of an investment, emphasizing the time it takes to reach a breakeven point.