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.

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Definitions:

Nonrenewable

Resources or energy sources that cannot be readily replaced by natural means at a pace quick enough to keep up with consumption.

Implicit Rate

The interest rate inherent in a lease, not explicitly stated, used to determine lease payments.

Incremental Borrowing Rate

The incremental borrowing rate is the interest rate a company would have to pay if it borrows additional funds.

Major Overhaul

Significant restorations or renovations to an asset, often extending its life or improving its efficiency.