Which of the following is correct about futures contracts?
A) Buyers of futures contracts make a profit when prices fall.
B) Buyers of futures contracts make a profit when interest rates rise.
C) Sellers of futures contracts make a profit when prices fall.
D) Sellers of futures contracts make a profit when prices rise.
E) a. and d.

Question

Which of the following is correct about futures contracts?
A) Buyers of futures contracts make a profit when prices fall. 
B) Buyers of futures contracts make a profit when interest rates rise.
C) Sellers of futures contracts make a profit when prices fall.
D) Sellers of futures contracts make a profit when prices rise.
E) a. and d.

Quizplus · Accepted Answer

The correct statement about futures contracts is that sellers of futures contracts make a profit when prices fall. This is because they would have sold the contract at a higher price and can repurchase it at a lower price, earning a profit. Buyers, on the other hand, make a profit when prices rise as they can purchase the commodity or asset at a lower price through the futures contract. Therefore options A, B, D, and E are incorrect.

Which of the Following Is Correct About Futures Contracts