A Futures Contract Is

question 149

Multiple Choice

A futures contract is:

• A) a contract to buy or sell commodities at some point in the future at a predetermined price.
• B) a contract to rent a resource for a specified period with the option of buying it at the end of the lease.
• C) an investment security whose value depends on the prices of several other securities.
• D) the rate at which one currency trades for another currency.

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Definitions:

Present Value

The contemporary valuation of a future monetary sum or cash flow series, as determined by an agreed-upon rate of return.

Future Cash Flows

Estimated amounts of money expected to be received or paid out over future periods.

Cash Payback Method

A financial analysis method used to determine the time needed for an investment to generate cash flows sufficient to recover the initial investment cost.

Present Value

The current value of a future amount of money or stream of cash flows given a specified rate of return.