A Futures Contract I.obligates the Buyer of the Contract to Buy a Specified

question 75

Multiple Choice

A futures contract
I.obligates the buyer of the contract to buy a specified amount of a commodity.
II.grants the buyer the right to either buy or sell a specified amount of a commodity.
III.uses specified settle prices that vary with the type of commodity.
IV.establishes the delivery price based on the selling price of the futures contract.

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

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Definitions:

Bilateral Contract

A contract involving two parties where each promises to perform an act in exchange for the other's act.

Strict Rules

Regulations or guidelines that are rigorously enforced and must be followed precisely.

Collateral Promise

A secondary promise to answer for the debt or duty of another person in case that person fails to fulfill the obligation.

Guarantor

An individual or entity that agrees to be responsible for another's debt or performance under a contract if the original party fails to comply.