Suppose You Buy an Asset at $50 and Sell a Futures

question 6

Multiple Choice

Suppose you buy an asset at $50 and sell a futures contract at $53.What is your profit at expiration if the asset price goes to $49? (Ignore carrying costs)

• A)-$1
• B)-$4
• C)$3
• D)$4
• E)none of the above

---

Definitions:

Trade-In Allowance

The amount credited to a buyer for trading in an old item towards the purchase of a new item, reducing the price of the new purchase.

Land Improvements

Enhancements to a plot of land such as landscaping, lighting, and paving, that are intended to make the land more usable and increase its value.

Fences

Structures built to enclose or separate areas, typically made out of wood, metal, or other materials, serving various purposes such as privacy, security, or decorative.

Interest

The cost of borrowing money, expressed as a percentage, charged by a lender to a borrower for the use of assets.