Futures Contracts Are Similar to Forward Contracts in That They

question 79

Multiple Choice

Futures contracts are similar to forward contracts in that they both

• A) have volatile price movements and strong interest from buyers and sellers.
• B) give the holder the option to make a transaction in the future.
• C) have similar liquidity.
• D) have similar credit risk.
• E) trade on the same exchange.

---

Definitions:

Dividend Policy

A strategy a company uses to decide how much it will pay out to shareholders in dividends.

Alternate Dividend Policy

A strategy employed by a company to distribute earnings to shareholders through dividends that may vary in amount and frequency depending on the company's earnings, investment opportunities, and capital needs.

Stock Repurchase

A financial transaction in which a company buys back its own shares from the marketplace, reducing the amount of outstanding stock.

P/E Ratio

The price-to-earnings ratio, a valuation metric for stocks calculated by dividing the market value per share by its earnings per share.