A(n)________ is a financial instrument that can be used to eliminate the effect of both favorable and unfavorable price movements.

Question

Quizplus · Accepted Answer

Futures contracts are a financial instrument that can be used to eliminate the effect of both favorable and unfavorable price movements. They allow parties to agree to buy or sell an asset at a predetermined price and time in the future, thereby hedging against price fluctuations. Convertible securities, call options, and put options offer some degree of financial protection but do not eliminate the effects of price movements as effectively as futures contracts.

A(n)________ Is a Financial Instrument That Can Be Used to Eliminate