Which of the Following Is True for Futures Contracts

question 1

Multiple Choice

Which of the following is true for futures contracts?

• A)They do not have standardized terms.
• B)They have clearinghouses that guarantee the transactions.
• C)They are private contracts between two parties.
• D)The parties have a higher risk of defaulting on a contract.
• E)The settlement of a futures contract occurs at the end of the contract.

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Definitions:

Purchase Method

The purchase method is an accounting approach used in mergers and acquisitions, where the assets and liabilities of the acquired company are consolidated at their fair market values.

Fair Market Value

The price at which an asset would exchange between a willing buyer and a willing seller, each having reasonable knowledge of the relevant facts, and neither being under any compulsion to buy or sell.

Goodwill

An intangible asset that arises when a buyer acquires an existing business, representing the premium paid over the fair market value of the identifiable assets and liabilities.