Financial Futures Have Become an Increasingly Attractive Investment Alternative Because

question 110

Multiple Choice

Financial futures have become an increasingly attractive investment alternative because the Chicago Board of Trade (CBOT) began trading them in 1977, and their hedging function partly accounts for the growth in trading. Which of the following statements concerning financial futures is true?

• A) Financial futures protect the investment portfolio against inflation in the economy.
• B) Investors seek protection against the increasing volatility of interest rates.
• C) Unlike commodity futures, factors that influence price shifts are not supply and demand of the commodity but buyer psychology.
• D) A reason for their popularity is that trading is restricted to government obligations, which reduces risks.
• E) A reason for their popularity is that trading is tax-free.

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Definitions:

Satisfy Debt

To fully pay off or settle a debt, meeting the terms agreed upon by the debtor and creditor.

Equipment

Equipment consists of the necessary tools, machinery, devices, or any tangible items required for the specific purpose of executing a task or activity.

Mortgage Insurance

An insurance policy designed to protect the lender from the risk of the borrower defaulting on a mortgage.

Mortgage Loan

A loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty.