The Value of a Futures Contract Immediately After Being Marked

question 31

Multiple Choice

The value of a futures contract immediately after being marked to market is

• A)numerically equal to the daily settlement amount
• B)the spot price plus the original forward price
• C)equal to the amount by which the price changed since the contract was opened
• D)simply zero
• E)none of the above

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Definitions:

Cost Structure

The composition of a company’s costs, including the ratio of fixed to variable costs and how these affect overall profitability.

Fixed Costs

Regardless of production or sales volumes, certain costs, like rent, salaries, and insurance, do not vary.

Variable Costs

Costs that vary directly with the level of production or sales volume, such as raw materials and direct labor.

Profit and Loss Statement

A financial statement that summarizes the revenues, costs, and expenses incurred during a specific period, typically a fiscal quarter or year.