Which of the following statements are true concerning stock index futures?
1) Stock index futures may be used to hedge against stock prices rising.
2) Stock index futures require substantial margin and are a source of financial leverage.
3) Stock index futures are settled in cash and not in delivery.
4) Stock index futures are settle in specific securities.
A)1 and 3
B)1 and 4
C)2 and 3
D)2 and 4

Question

Which of the following statements are true concerning stock index futures?
​1) Stock index futures may be used to hedge against stock prices rising.
2) Stock index futures require substantial margin and are a source of financial leverage.
3) Stock index futures are settled in cash and not in delivery.
4) Stock index futures are settle in specific securities.
A)​1 and 3
B)​1 and 4
C)​2 and 3
D)​2 and 4

Quizplus · Accepted Answer

1) Stock index futures can be used to hedge against a rise in stock prices, as the value of the futures contract will decrease as the underlying stock index increases.
3) Stock index futures are settled in cash, which means the profits and losses are realized through cash transactions rather than the physical delivery of the underlying securities.

Which of the Following Statements Are True Concerning Stock Index