Which One of the Following Statements Is True Regarding Futures

question 13

Multiple Choice

Which one of the following statements is true regarding futures contracts?

• A)Futures prices are generally set equal to the spot price on the delivery date.
• B)Futures contracts generally grant the buyer the option to accept only a portion of the contract.
• C)Cost and convenience are the two key considerations when establishing the settlement procedures.
• D)The seller of a futures contract has the option to deliver cash in an amount equal to the contract value in lieu of the underlying asset.
• E)The buyer and seller of the contract negotiate the price on the maturity date.

---

Definitions:

Marginal Cost

Marginal cost represents the increase or decrease in the total cost of production when the quantity produced is incremented by one unit.

Purely Competitive Firm

A business that operates in a market with many buyers and sellers, where each firm has no control over the market price and produces a homogeneous product.

Maximize Profit

The economic goal of efficiently allocating resources in production to achieve the highest possible return or profit.

Start-up Firms

New business ventures that are in the early stages of operation, often characterized by innovative products or services and high growth potential.