Most Large Firms Hold a Cash Balance Greater Than Most

question 1

Multiple Choice

Most large firms hold a cash balance greater than most models imply because:

• A)it is too difficult to estimate the costs of security transactions.
• B)banks are compensated by account balances for payment of services.
• C)corporations have few bank accounts and it is difficult to manage their cash.
• D)cash is costless and need not be managed closely.
• E)None of the above.

Understand the concepts of long and short positions in futures contracts and their market implications.

Identify the diverse types of futures contracts, including financial and commodity futures.

Comprehend the mechanisms of profit and loss in futures trading.

Recognize the role and mechanics of margin in futures trading.

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Definitions:

Financial Capital

Refers to the funds provided by lenders (and investors) to businesses to purchase real capital equipment for producing goods/services.

Raw Materials

Basic materials that are processed or refined to create goods and products in various industries.

Soviet Union

A former federation of Communist republics that was established in 1922 and dissolved in 1991, consisting of Russia and several other countries in Eurasia.

Supply

The aggregate quantity of a product or service that can be bought at any specific price point within a particular market.