Question

Which of the following features apply to a futures contract?

I. zero-sum game
II. derivative security
III. maturity date
IV. settlement procedure
A.I and II only
B.I and III only
C.II and III only
D.II, III, and IV only
E.I, II, III, and IV

Answer 1

A futures contract is a zero-sum game, derivative security, with a maturity date and a settlement procedure. All features from I to IV apply to a futures contract, with the correct option being E.

Step-by-step explanation:

The question pertains to the features that apply to a futures contract. A futures contract has several distinct features:

• Zero-sum game: The gain or loss of the contract for one party is exactly balanced by the loss or gain for the other party.
• Derivative security: A futures contract derives its value from an underlying asset.
• Maturity date: Every futures contract specifies a date on which the contract expires or 'matures'.
• Settlement procedure: There are specific rules about how and when the contract is to be settled, either by physical delivery of the asset or through a cash settlement.