A futures contract is an agreement that specifies the delivery of a commodity or financial security at a:* A. predetermined future date with a price to be negotiated at the time of delivery B. predetermined future date with a currently agreed-on price C. currently agreed-on price, with a delivery date to be negotiated later D. predetermined future date with a price and delivery to be negotiated later

A futures contract is an agreement that specifies the delivery of a commodity or financial security at a:* A. predetermined future date with a price to be negotiated at the time of delivery B. predetermined future date with a currently agreed-on price C. currently agreed-on price, with a delivery date to be negotiated later D. predetermined future date with a price and delivery to be negotiated later

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter21: Risk Management

Section: Chapter Questions

Problem 6QTD

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A contract requiring a specified future monetary payment at a specified future point in time in exchange for the delivery of a specific asset is called a: *A. nonconvertible option.B. hedge.C. long contract.D. swap.
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Describe how the price of a futures contract is established in theory, with reference to arbitrage.
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In the context of financial derivatives, what is a futures contract? A) An agreement to exchange assets at a predetermined price and date. B) A contract that grants the holder the right, but not the obligation, to buy or sell an asset. C) A contract to buy or sell a specific quantity of an asset at a future date at a price specified today. D) A contract that provides regular interest payments and returns the principal at maturity.
Define each of the following terms: c. Financial futures; forward contract
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(a) Outline in detail what is meant by a forward and futures contract. Evaluate the relationship between futures price and spot price, and give reasons to justify the necessity for exchange margin accounts. (b) Explain the concept of cost of carry model and its role in the pricing of financial futures contracts.
Explain what is meant by “initial margin” on a futures contract
20. A futures contract a. is an agreement to buy or sell a specified amount of an asset at the spot price on the expiration date of the contract. b. is an agreement to buy or sell a specified amount of an asset at a predetermined price on the epiration date of the contract. c. gives the buyer the right,, but not the obligation, to buy an asset some time in the future. d. is a contract to be signed in the futurue by the buyer and the seller of the commodity e. none of these.
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