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:

Successive Years

Consecutive years following one after the other without interruption.

Compound-Interest GIC

A Compound-Interest Guaranteed Investment Certificate (GIC) is a financial product that pays interest on your initial investment, with the interest being compounded at specified intervals, leading to increased returns over time.

Compounded Semiannually

The calculation of interest where it is added to the principal twice a year, resulting in the interest earning interest semiannually.

Maturity Value

The total amount payable to an investor at the end of a fixed term investment, including principal and interest.