Which One of the Following Statements Is Correct If a Speculator

question 55

Multiple Choice

Which one of the following statements is correct if a speculator short sells a commodity or financial futures contract?

• A) The speculator expects to profit from a decline in the price of the contract.
• B) The speculator stands to make an unlimited amount of profit since there is no limit to how high the price of the underlying commodity or financial instrument can rise.
• C) The speculator is hoping to gain some of the benefit derived from the volatile price while limiting his/her exposure to loss.
• D) The speculator may be hedging if the underlying commodity is not in the speculator's possession.

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Definitions:

Social Cognitive Theory

A theory in psychology that suggests learning occurs in a social context and can happen purely through observation or direct instruction, even in the absence of motor reproduction or direct reinforcement.

Coregulation Theory

A concept in psychology that suggests a dynamic, reciprocal relationship in emotional or behavioral regulation between individuals, such as in close relationships.

Cognitive-Developmental Theory

A theory of the stages through which children's cognitive abilities develop, originally proposed by Jean Piaget, highlighting the importance of mental processes in understanding the world.

Fair-Weather Cooperation

A type of collaboration or partnership that only exists or functions well under favorable conditions, lacking support through challenges or difficulties.