All futures contracts are traded on a margin basis. What does "margin" mean, and how does the use of margin affect the inherent risk-return nature of the futures market?
What will be an ideal response?
Answer: Margin refers to the amount of equity that goes into a purchase. The use of margin in the futures market means that there is a great deal of leverage involved, and therefore a great deal of risk. Consequently, the pay-offs can be tremendous, but so can the losses.
Learning Outcome: F-01 Describe the different financial markets and the role of the financial managers
You might also like to view...
Which of the following statements concerning selling in England is true?
A) The British consider it rude to discuss business after the business day. B) You should expect a quick decision on the part of the client. C) The British appreciate very informal introductions. D) Critiquing the competition's offering is acceptable. E) The British tend to be very expressive and casual.
Which one of the following would not be a party to a defined benefit plan?
a. The sponsoring employer b. A pension fund c. The employee d. The actuary
The basic steps in developing an effective affirmative action plan include all of the following EXCEPT
A. initiating proactive recruitment and selection methods. B. surveying present minority and female employment by department and job classification. C. establishing an internal audit and reporting program to evaluate progress. D. establishing a quota system and timetable for hiring.
The Sherman Act was enacted to prevent fraud in the sale of securities
Indicate whether the statement is true or false