By Establishing a Short Position in a Futures Contract, a Speculator

question 42

Multiple Choice

By establishing a short position in a futures contract, a speculator __________

• A) accepts risk associated with a price decrease in the underlying asset.
• B) accepts risk associated with a price increase in the underlying asset.
• C) is using their position to hedge against a price increase of the underlying asset.
• D) is using their position to hedge against price risk.
• E) agreeing to buy the underlying asset in the future a price set out in the futures contract.

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Definitions:

CFO

Chief Financial Officer, an executive responsible for managing the financial actions of a company.

Regulation A

An exemption under the Securities Act allowing smaller companies to offer and sell up to $50 million of securities in a 12-month period, subject to less stringent reporting requirements.

Resold

Refers to the action of selling something that has already been bought; involves the subsequent or secondhand sale of an item or property.

Securities Act of 1934

The Securities Act of 1934 is a U.S. federal law that primarily governs the trading of securities after the initial sale, establishing rules for transactions, the disclosure process, and the prevention of fraud.