There Is a Futures Contract for the Purchase of 100

question 108

Multiple Choice

There is a futures contract for the purchase of 100 bushels of wheat at $2.50 per bushel.If the market price of wheat increases to $3.00 per bushel:

• A)The buyer (long position) needs to transfer $50 to the seller (short position).
• B)The seller (short position) needs to transfer $50 to the buyer (long position).
• C)Nothing happens since with a futures contract all payments are made at the settlement date.
• D)Nothing happens since marked to market adjustments only take place when the market price falls below the contract price.