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.

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Definitions:

WACC

WACC, or Weighted Average Cost of Capital, represents a firm's blended cost of capital across all sources, including debt and equity, weighted by their respective proportions.

NPV

Net Present Value, a calculation used to determine the value of a project or investment by discounting its future cash flows to the present.

Cash Flow

The total amount of money being transferred into and out of a business, especially considered important for maintaining liquidity.

Cost Of Capital

The total cost of funds used for financing a business, including debt and equity.