Which of the Following Statements Is True

question 55

Multiple Choice

Which of the following statements is true?

• A)The default risk in futures contracts is considered to be less than that of forward contracts because of daily marking to market of futures.
• B)The default risk in futures contracts is considered to be less than that of forward contracts because of margin requirements on futures that act as a security bond and because of default guarantees by the future exchange itself.
• C)The default risk in futures contracts is considered to be less than that of forward contracts because of price limits that spread out over times of extreme price fluctuations.
• D)All of the listed options are correct.

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Definitions:

Accrued Interest Expense

The interest expense that has been incurred but not yet paid, representing the cost of borrowing money for a particular period.

Incurred During

The phrase refers to costs or expenses that happen or accumulate within a specific period.

Promissory Note

A financial tool comprising a formal agreement where one entity commits to paying a specific amount of money to another entity, either upon request or at a predetermined date in the future.

Time Extension

An additional period of time given to complete a task or fulfill an obligation that extends beyond the original deadline.