Which of the Following Statements Concerning Futures Are Correct

question 13

Multiple Choice

Which of the following statements concerning futures are correct?
I. Investors in financial futures can earn both dividend income from the underlying security as well as the potential capital gain from the futures contract.
II. The return on a futures contract is computed by dividing the net difference between the sale and the purchase price of the contract by the amount of the margin deposit.
III. It is very easy to lose your entire investment in a futures contract in a very short period of time due to the volatility of the futures market and also the use of leverage.
IV. Conservative investors tend to purchase one futures contract as a means of increasing the return on their portfolio while maintaining minimal risk.

• A) I and II only
• B) II and III only
• C) I, II and IV only
• D) I, II and III only

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