Investors who take long positions in futures agree to

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6. Investors who take long positions in futures agree to __________ of the commodity on the delivery date, and those who take the short positions agree to __________ of the commodity. A. make delivery; take delivery B. take delivery; make delivery C. take delivery; take delivery D. make delivery; make delivery E. negotiate the price; pay the price The trader taking the long position commits to purchase the commodity on the delivery date. The trader taking the short position commits to delivering the commodity at contract maturity. The trader in the long position is said to "buy" the contract; the trader in the short position is said to "sell" the contract. However, no money changes hands at this time. Difficulty: Moderate 7. The terms of futures contracts such as the quality and quantity of the commodity and the delivery date are The futures exchanges specify all the terms of the contracts except price; as a result, the traders bargain over the futures price. Difficulty: Moderate 22-4
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Chapter 22 - Futures Markets 8. A trader who has a __________ position in wheat futures believes the price of wheat will __________ in the future. The trader holding the long position (the person who will purchase the goods) will profit from a price increase. Profit to long position = Spot price at maturity - Original futures price. Difficulty: Moderate 9. A trader who has a __________ position in gold futures wants the price of gold to __________ in the future. Profit to short position = Original futures price - Spot price at maturity. Thus, the person in the short position profits if the price of the commodity declines in the future. Difficulty: Moderate 22-5
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Chapter 22 - Futures Markets 10. The open interest on silver futures at a particular time is the A. number of silver futures contracts traded during the day. B. number of outstanding silver futures contracts for delivery within the next month. C. number of silver futures contracts traded the previous day. D. number of all silver futures outstanding contracts. E. none of the above. Open interest is the number of contracts outstanding. When contracts begin trading, open interest is zero; as time passes more contracts are entered. Most contracts are liquidated before the maturity date. Difficulty: Moderate 22-6
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Chapter 22 - Futures Markets
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