A farmer and a sugar factory enter into a futures contract requiring the delivery of 4,000 tons of sugarcane to the buyer in June at a price of $30 per ton. Suppose the futures contracts for sugarcane increases to $35 per bushel the day after the farmer and the sugar factory enter into their futures contract. If the contract was settled under these conditions, the farmer will have:

Select one:

a.lost $5.

b.lost $20,000.

c.gained $5.

d.gained $20,000.

One of the limitations of a forward contract is that:

Select one:

a.it is very difficult to frame and understand the agreement.

b.the seller cannot be sure of the amount she will receive on settlement date.

c.it is costly to find a willing counterparty.

d.the prices in the forward market are highly volatile.

In order to prevent traders from reneging on futures contracts, exchanges require traders to maintain _____.

Select one:

a.micro accounts

b.savings accounts

c.credit accounts

d.margin accounts