A ________ Contract Is Often Used for Hedging and Is

question 101

Multiple Choice

A ________ contract is often used for hedging and is an exchange-traded agreement to purchase an asset at some future date at a price that is locked in today.

• A)call option
• B)futures
• C)put option
• D)long term
• E)storage

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Definitions:

Simple Rate of Return

A method to determine the efficiency of an investment, calculated by dividing the annual incremental net operating income by the initial investment's cost.

Investment Project

A project involving the allocation of resources with the expectation of future returns, such as profits or benefits.

Discount Factor(s)

Multipliers used in discounted cash flow (DCF) analyses to convert future cash flows into their present value, reflecting the time value of money.

Discount Rate

The discount rate applied to calculate the current value of future cash flows.