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A small commitment fee needed to purchase a futures contract is called a_____

a.margin.
b.speculator.
c.short position.
d.long position.

1 Answer

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Final answer:

The small commitment fee for a futures contract is known as a margin, which serves as collateral to ensure the contract's performance.

Step-by-step explanation:

The small commitment fee needed to purchase a futures contract is called a margin. This fee serves as collateral to ensure the performance of the futures contract by the purchaser. In the context of hedging, firms often use futures contracts to guarantee a certain exchange rate for a currency in the future, thus protecting against the risk of exchange rate fluctuations. Companies providing such hedging services may require a fee or create a spread in the exchange rate to earn from the service provided.

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