Uses of Future Contracts Include

question 3

Multiple Choice

Uses of future contracts include

• A) reducing uncertainty about the future cost of key inputs.
• B) reducing uncertainty about the prices that will be received when a commodity is ready for market.
• C) speculating on future price movements of commodities which the speculator neither uses nor produces.
• D) all of the above.

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Definitions:

Inflation Rate

The percentage increase in the general level of prices for goods and services over a certain period, reflecting the decreasing purchasing power of money.

Rational Person

An individual who systematically and logically evaluates options to make decisions that maximize their personal benefit or utility.

Present Value

The present worth of a sum of money or series of cash flows anticipated in the future, calculated using a certain rate of return.

Consumption Plan

An outline of how individuals or households intend to allocate their income towards consumption goods and services over a period.