Why Is the Initial Value of a Futures Contract Zero

question 48

Multiple Choice

Why is the initial value of a futures contract zero?

• A)the futures is immediately marked-to-market
• B)you do not pay anything for it
• C)the basis will converge to zero
• D)the expected profit is zero
• E)none of the above

Understand how noncash investing and financing activities are reported.

Interpret the impact of transactions on cash flows and the financial position of a company.

Recognize how the direct and indirect methods for cash flows from operating activities are applied.

Identify the role of spreadsheets in preparing financial statements.

---

Definitions:

Mormon Followers

Members of The Church of Jesus Christ of Latter-day Saints, a religious group known for their unique beliefs in Christianity, founded by Joseph Smith in the early 19th century.

Utah

A state in the western United States known for its vast expanses of desert, the Wasatch Range of mountains, and the Great Salt Lake, as well as its significant Mormon community.

Corporations

Legal entities recognized by law that can acquire liabilities and assets, enter into contracts, and are formed to conduct business activities.