Which of the Following Statements Is INCORRECT

question 11

Multiple Choice

Which of the following statements is INCORRECT?

• A) Derivatives trade in zero net supply markets.
• B) A derivatives trade is a zero-sum game in the absence of market imperfections like transaction costs.
• C) Derivatives are powerful financial tools that can be used for speculation as well as hedging.
• D) Derivatives have a history of always causing significant losses to any trader who trades these contracts.
• E) Derivatives can help traders to reduce price risk from economic activities.

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Definitions:

International Trade

The exchange of goods and services between countries.

Equilibrium Price

The market price at which the supply of an item equals the quantity demanded, leading to a stable market condition without surplus or shortage.

China

A populous country in East Asia, known for its ancient civilization and as a major economic and political power in the modern world.

Trade Restrictions

Regulations or policies that limit international trade, often imposed to protect domestic industries from foreign competition.