Fred Purchased a Futures Contract on Live Hogs Through Broker

question 55

Multiple Choice

Fred purchased a futures contract on live hogs through Broker A. After purchasing the contract, Fred moved his investments to Broker B. During the transition, the contract on the hogs was forgotten. When the delivery date for the futures contract arrived,

• A) the pigs were not delivered because Fred did not ask for them.
• B) the futures contract was not exercised.
• C) Fred took delivery of live hogs.
• D) Broker A had to pay for the hogs so that they would not be delivered to Fred.

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Definitions:

Investing Activities

Financial transactions related to the acquisition or sale of long-term assets and other investments not included in cash equivalents.

Operating Activities

Transactions and other events that affect the net income of a business, relating to its principal revenue-producing activities.

Accounting Equation

The fundamental equation of accounting, representing the relationship between assets, liabilities, and owner's equity (Assets = Liabilities + Equity).

Cash Dividend

A payment made by a company out of its profits to its shareholders, typically in the form of cash.