SIE Exam Question 1010: Answer and Explanation

Question: 1010

All but which of the following are correct regarding a futures contract?

• A. It is an agreement to buy or sell a specific quantity of a commodity or financial currency at a predetermined price on a specific future date.
• B. The holder of a futures contract cannot purchase an offsetting contract that cancels the original position, rather than receiving delivery of the commodity.
• C. Commodities such as grains, metals, and natural gas have tradable futures contracts.
• D. All of the above are correct.

Correct Answer: B

Explanation:

A futures contract is an agreement to buy or sell a specific quantity of a commodity or financial currency at a predetermined price on a specific future date. The holder of a futures contract may purchase an offsetting contract that cancels the original position, rather than receiving delivery of the commodity. Commodities such as grains, metals, and natural gas all have tradable futures contracts.