A Firm Sells a Currency Futures Contract, and Then Decides

question 61

Multiple Choice

A firm sells a currency futures contract, and then decides before the settlement date that it no longer wants to maintain such a position. It can close out its position by:

• A) buying an identical futures contract.
• B) selling an identical futures contract.
• C) buying a futures contract with a different settlement date.
• D) selling a futures contract for a different amount of currency.
• E) purchasing a put option contract in the same currency.

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Definitions:

Contributed Capital

Contributed capital, also known as paid-in capital, represents the funds raised by issuing stock directly from the corporation.

Common Stock Dividend

A payment made by a corporation to its shareholders, usually in the form of cash or additional shares, as a portion of the profits.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing ownership interest in the company.

Shares Outstanding

The total number of shares of a company's stock that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.