A Speculator Will Often Prefer to Buy a Futures Contract

question 6

Multiple Choice

A speculator will often prefer to buy a futures contract rather than the underlying asset because ____________.
I.gains in futures contracts can be larger due to leverage
II.transaction costs in futures are typically lower than in spot markets
III.futures markets are often more liquid than the markets of the underlying commodities

• A) I and II only
• B) II and III only
• C) I and III only
• D) I, II and III

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Definitions:

Quality Control

The procedures and processes used to ensure that a product or service meets a specified set of quality criteria or standards.

Inventory Storage

The process and facilities used to keep goods stocked and maintained until they are sold or distributed.

Equivalent Units

A concept in cost accounting that converts partially completed units of production into a number of fully completed units for inventory valuation.

Units Transferred Out

Refers to the number of units moved from one production process to the next or finished goods completed during a period.