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What is the major difference in the obligation of one with a long position in a futures (or forward) contract in comparison to an options contract?Answer: A futures or forward contract is a vehicle for selling or buying a stated amount of foreign exchange at a stated price per unit at a fixed time in the future. Determine that if the long holds the contract to the delivery date, he pays the effectual contractual futures (or forward) price, consider whether it is an advantageous price in comparison to the spot price at the delivery date. By difference, an option is a contract providing the long the right to buy or sell a fixed quantity of an asset at a specified price at some time in the future, although not enforcing any obligation on him if the spot price is much more favorable as compared to the exercise price. Since the option owner does not have to exercise the option if it is to his disadvantage, the option has a price, or premium, while no price is paid at inception to enter into a futures (or forward) contract.
Step 1) Opportunity Set Graph:Combine 2 of your stocks (Ignore the other 2 stocksfor this step only). Construct an investment opportunity set (the curved set) between the two risk
Q. Drawbacks or Criticism of MM Approach? Risk Perceptions of personal as well as corporate leverages are different: - It is incorrect to presume that 'personal leverage' is a
What is Cost of Capital Cost of Capital is the rate which should be earned in order to satisfy required rate of return of the firm's investors. It may also be defined as the ra
Classification of finance and abrief description of each source of fund
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The ledger of AISExperts Inc. showed the following balances after adjustment , but before closing, on December 31, 2012, the end of the current year: Accounts payab
It is an accounting term which refers to the balance sheet item that accounts for dividends that have been confirmed but not yet given to shareholders. Accrued dividends are taken
The holder of a corporate debt instrument is preferred to equity shareholders in the bankruptcy proceedings. However, secured/senior creditors are preferred to no
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FEATURES OF A BUDGET a. It is prepared for a specific period. b. It is expressed in quantity or money or both. c. It is a statement describing ob
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