Why Is the Initial Value of a Futures Contract Zero

question 48

Multiple Choice

Why is the initial value of a futures contract zero?

• A)the futures is immediately marked-to-market
• B)you do not pay anything for it
• C)the basis will converge to zero
• D)the expected profit is zero
• E)none of the above

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Definitions:

Experience Stress

the psychological and physical state of being under pressure or tension, which can arise from challenging or demanding circumstances.

Sensorimotor

Relating to or involving both sensory and motor functions or pathways, characterizing the first stage of cognitive development according to Piaget.

Perceptual Systems

The sensory systems involved in processing and interpreting information from the environment, such as vision, hearing, touch, taste, and smell.

Concrete Operational

A stage in Piaget's theory of cognitive development, occurring from about 7 to 12 years of age, where children gain the ability to think logically about concrete events.