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Futures

Quiz by Daniel Cleavenger

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7 questions
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  • Q1
    Why 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 worthless
    It is required by law
    Cash transactions are never allowed
    30s
  • Q2
    In the example of the baker, what does entering a supply agreement for flour represent?
    A method to increase profit margins immediately
    A way to diversify his portfolio
    A way to hedge against rising costs of ingredients.
    A strategy to sell more bagels
    30s
  • Q3
    What does a future curve represent?
    A prediction of stock market trends
    A graph showing the forward prices of an asset for different expiration dates.
    A list of current prices of assets
    A historical price chart of an asset
    30s
  • Q4
    Why do investors use futures to manage their portfolios?
    To eliminate all risks
    To guarantee high returns
    To invest without any capital
    To alter risk-return features and hedge against market risks.
    30s
  • Q5
    What influences the prices of futures, especially for commodities like natural gas?
    International trade laws
    Government regulations
    Seasonal demand and supply fluctuations.
    Stock market trends
    30s
  • Q6
    What advantage does a long position in a futures contract provide?
    Guaranteed income regardless of market conditions
    The opportunity to profit if the asset's price rises above the forward price.
    Complete avoidance of market risk
    Immediate liquidity in the investment
    30s
  • Q7
    Who typically uses futures contracts?
    Only individual stockholders
    Speculators looking to gain exposure to various assets.
    Only large corporations
    Only government entities
    30s

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