An Agreement That Grants Its Owner the Right, but Not

question 25

Multiple Choice

An agreement that grants its owner the right, but not the obligation, to buy or sell a specific asset at a specific price for a set period of time is called a(n) ________ contract.

• A) option
• B) forward
• C) futures
• D) swap
• E) spot

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Definitions:

Mustangs

Wild horses in the Western United States, descended from horses brought to the Americas by Spanish explorers.

Law of Demand

A fundamental economic principle stating that, all else being equal, as the price of a good increases, consumer demand for the good decreases, and vice versa.

Average Price

The mean price of a good or service, calculated by dividing the total revenue by the quantity sold.

Equilibrium Price

The cost at which the amount of a product consumers want to buy matches the amount producers are willing to sell, leading to equilibrium in the market.