Which of the Following Statements Regarding Futures Contracts Is FALSE

question 23

Multiple Choice

Which of the following statements regarding futures contracts is FALSE?

• A)Both the buyer and the seller can get out of the contract at any time by selling it to a third party at the current market price.
• B)Futures prices are not prices that are paid today.Rather,they are prices agreed to today,to be paid in the future.
• C)Futures contracts are traded anonymously on an exchange at a publicly observed market price and are generally very illiquid.
• D)Traders are required to post collateral,called margin,when buying or selling commodities using futures contracts.

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Definitions:

Fair Value Method

An accounting approach that estimates the price of an asset or liability based on current market conditions.

Bonds

Long-term debt securities issued by corporations, municipalities, or governments that pay periodic interest payments to investors.

Fair Value

A measure of the estimated price at which an asset could be bought or sold or a liability settled, under current market conditions.

Passive Investments

Investments in which the investor does not actively manage or influence the operation of the asset, such as stocks or mutual funds.