If investors speculate in derivative contracts rather than in the underlying asset, they will probably achieve ____ returns, and they are exposed to relatively ____ risk.

Question

Quizplus · Accepted Answer

Derivative contracts, such as options and futures, can offer higher returns due to leverage, but they also come with higher risk compared to investing directly in the underlying asset. This is because derivatives can be more volatile and sensitive to market changes.

If Investors Speculate in Derivative Contracts Rather Than in the Underlying