Two Key Features of Futures Contracts That Make Them More

question 49

Multiple Choice

Two key features of futures contracts that make them more in demand than forward contracts are:

• A)futures are traded on exchanges and must be marked to the market.
• B)futures contracts allow flexibility in delivery dates and provide a liquid market for netting positions.
• C)futures are marked to the market and allow delivery flexibility.
• D)futures are traded in liquid markets and are marked to the market.
• E)None of the above.

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Definitions:

Variable Manufacturing Costs

Expenses that change in proportion to the manufacturing output, including costs related to direct labor, materials, and manufacturing overhead that fluctuates with production volume.

Operating Income

Earnings from a company's core business operations, excluding expenses and revenues from non-operating activities.

Fixed Overhead

The set costs associated with operating a business that does not change in relation to production volume, such as rent, salaries, and insurance.

Administrative Costs

Expenses related to the general operations of a business, such as office supplies, management salaries, and utilities, which do not directly tie to specific product or service production.