The Purchaser of a Futures Contract

question 44

Multiple Choice

The purchaser of a futures contract

• A) is required to obtain a margin loan equal in amount to the cost of the contract minus the cash down payment.
• B) is generally required to make a cash deposit of 10 to 20% of the contract price at the time the contract is entered.
• C) does not have to worry about margin calls since margin loans are not required.
• D) is affected by the daily procedure known as mark-to-the-market.

---

Definitions:

Factoring Fee Expense

A cost incurred by a business when it sells its accounts receivable to a third party (the factor) at a discount.

Accounts Receivable

Funds that clients or customers owe to a company for products or services that have been provided but not yet compensated for.

Necessary Cash

The minimum amount of cash required by a company to carry out its day-to-day operations.

Contra Asset Account

An account on a company's balance sheet representing deductions from the gross amount of an asset, such as accumulated depreciation on fixed assets.