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

Question

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

Quizplus · Accepted Answer

Buyers of futures contracts make a profit when the price of the underlying asset (such as a commodity, currency, or stock) rises. This is because they have agreed to buy the asset at a predetermined price (the futures price) and can then sell it on the open market for a higher price, pocketing the difference.

Option B is incorrect because interest rates have nothing to do with futures contracts.

Option C is incorrect because sellers of futures contracts make a profit when prices fall. They have agreed to sell the asset at a predetermined price, which may be higher than the market price if prices decrease.

Option D is incorrect because, again, interest rates have nothing to do with futures contracts.

Option E is incorrect because only option B is incorrect.

Which of the Following Is Correct About Futures Contracts