Futures
Quiz by Daniel Cleavenger
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7 questions
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- Q1Why might a futures contract be settled in cash rather than by physical delivery?To simplify transactions and avoid the logistics of asset transfer.Because the asset is always worthlessIt is required by lawCash transactions are never allowed30s
- Q2In the example of the baker, what does entering a supply agreement for flour represent?A method to increase profit margins immediatelyA way to diversify his portfolioA way to hedge against rising costs of ingredients.A strategy to sell more bagels30s
- Q3What does a future curve represent?A prediction of stock market trendsA graph showing the forward prices of an asset for different expiration dates.A list of current prices of assetsA historical price chart of an asset30s
- Q4Why do investors use futures to manage their portfolios?To eliminate all risksTo guarantee high returnsTo invest without any capitalTo alter risk-return features and hedge against market risks.30s
- Q5What influences the prices of futures, especially for commodities like natural gas?International trade lawsGovernment regulationsSeasonal demand and supply fluctuations.Stock market trends30s
- Q6What advantage does a long position in a futures contract provide?Guaranteed income regardless of market conditionsThe opportunity to profit if the asset's price rises above the forward price.Complete avoidance of market riskImmediate liquidity in the investment30s
- Q7Who typically uses futures contracts?Only individual stockholdersSpeculators looking to gain exposure to various assets.Only large corporationsOnly government entities30s