Why Is It Difficult to Compute the Unrealised Return on a Futures

question 25

Multiple Choice

Why is it difficult to compute the unrealised return on a futures contract?

• A) The risk-free rate may change
• B) Future dividends are unknown
• C) Futures trading requires an upfront payment that consists a fixed percentage of the total value of the security
• D) The cash outlay in a futures contract is substantially less than required for purchasing the underlying security

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Definitions:

Generalizable

The extent to which findings or results from a study can be applied to larger populations or different contexts beyond the original study.

Replication

The process of repeating a study or experiment to verify its findings or to ensure the reliability of the results.

Experimenter Bias

A form of bias introduced by the experimenter whose expectations about the outcome of the experiment can potentially influence the results.

Social Desirability Bias

The propensity of survey participants to give answers they feel will be received well by others.