An option contract:
I.can be used to hedge risk.
II.can be used to speculate in the market.
III.can be based on a futures contract to create a futures option.
IV.cannot be based on a foreign currency.
A)II and III only
B)I and II only
C)I, II, and III only
D)II, III, and IV only
E)I, II, III, and IV

Question

Quizplus · Accepted Answer

Option contracts can be used to hedge risk or speculate in the market. They can also be based on a futures contract to create a futures option. However, options can also be based on foreign currencies, making statement IV false. Therefore, choices I, II, and III are correct, but IV is not.

An Option Contract: I.can Be Used to Hedge Risk