A futures contract on gold states that buyers and sellers agree to make or take delivery of an ounce of gold for $400 per ounce. The contract expires in 3 months. The current price of gold is $400 per ounce. If the price of gold rises and continues to rise every day over the 3 month period,then when the contract is settled,the buyer will _____ and the seller will _____.

Question

Quizplus · Accepted Answer

If the price of gold rises and continues to rise every day over the 3 month period, then the buyer will gain because they locked in a lower price of $400 per ounce when the current price of gold was also $400 per ounce. The seller will lose because they are obligated to sell the gold for $400 per ounce when the current price of gold is higher. Therefore, B is the best choice.

A Futures Contract on Gold States That Buyers and Sellers