If Investors Speculate in the Underlying Asset Rather Than Derivative

question 66

Multiple Choice

If investors speculate in the underlying asset rather than derivative contracts on the underlying asset, they will probably achieve ____ returns, and they are exposed to relatively ____ risk.

• A)lower; lower
• B)lower; higher
• C)higher; lower
• D)higher; higher

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Definitions:

Operating Activities

Transactions and events related to the principal revenue-producing activities of an entity, influencing the net cash flow from operating activities.

Financing Activities

Transactions and events involving the flow of cash between a company and its owners, investors, or creditors.

Indirect Method

A reporting approach used in statement of cash flows to adjust net income for non-cash transactions and changes in working capital to arrive at cash provided by or used in operating activities.

Operating Activities

Activities related to the core business operations of a company, including production, sales, and delivery of the company's products and services.