Which of the Following Statements Is True Regarding Forward Contracts,futures

question 12

Multiple Choice

Which of the following statements is true regarding forward contracts,futures contracts,options and swaps?

• A)A forward contract can be purchased on the open market and is recorded at its historical cost,then adjusted for changes in the market.
• B)A futures contract is negotiated between two parties who are betting in the opposite direction on the movement of the underlying price.
• C)An option is a contract requiring the holder to either "put" or "call" an underlying asset at a specified point in time.
• D)A swap is a contract between two parties to exchange an ongoing stream of cash flows.

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Definitions:

Capital Expenditures

Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, or equipment.

Utility of Fixed Assets

The value or service that fixed assets, such as machinery and buildings, provide to a business over their useful lives.

Accounting Period

A period of time used for calculating financial performance, commonly a quarter (three months) or a year, during which all financial transactions are recorded and reported.

Lease Contract

A legal agreement between two parties where one party allows the other to use a property, equipment, or service for a specified period in exchange for payment.