When an Interest-Bearing Security Is the Underlying Asset for a Futures

question 53

Multiple Choice

When an interest-bearing security is the underlying asset for a futures contract, it is called:

• A) a forward contract.
• B) an interest rate futures.
• C) a commission futures.
• D) a speculative futures.
• E) an interest rate swap.

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Definitions:

Private Good

A product or service that is excludable and rival in consumption, meaning only those who pay for it can consume it, and one person’s consumption prevents another's.

Common Resource

A type of good that is non-excludable but rivalrous, meaning it's available to everyone but its consumption by one individual diminishes its availability for others.

Tragedy of the Commons

A situation where individual users, acting independently according to their own self-interest, deplete or spoil shared resources, even though it is not in anyone's long-term interest.

Social Incentives

Motivations that influence an individual's behavior based on social factors, including approval, respect, or the desire to be part of a community.