Foundation of Finance
Quick practice
Question 1 of 4
In the highly regulated world of financial derivatives, Futures contracts heavily rely on a daily systemic accounting mechanism known as "Mark-to-Market." What does this mechanism specifically achieve?
It physically delivers the underlying agricultural commodity to the buyer's warehouse every single evening.
It calculates the daily profit or loss on the contract and transfers the actual cash between the buyer's and seller's margin accounts at the end of every single trading day.
It strictly limits the number of contracts a trader can purchase in a single calendar year.
It forces the immediate legal cancellation of the contract if the market price drops by more than five percent.
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