CFA Practice Question

There are 206 practice questions for this study session.

CFA Practice Question

Everything on a futures contract is standardized except for?

A. delivery date
B. quantity of the commodity
C. quality of the commodity
D. price of the commodity
E. None of them is an exception.
Correct Answer: E

User Contributed Comments 16

User Comment
Pieter Anyone can explain to me how the price is standardised?
Snider standardized price means you can get 1 1/8, or 1/32 of a dollar, etc. However you cannot get a random price such as 1.13763.
bananabun how do you stanadardise the quality?
0is4eva In the reading: "In a futures contract, the price is the only term established by the two parties; the exchange establishes all other terms. Moreover, the terms that are established by the exchange are standardized, meaning that the exchange selects a number of choices for underlyings, expiration dates, and a variety of other contract-specific items. ... With respect to the underlying, a given asset has a variety of specifications and grades. ... The exchange decides at the time it designs the contract. ... The exchange also decides on the price quotation unit e.g. Treasury bond futures are quoted in points and 32nds of par of 100. Hence you will see a price like 104 21/32 which means 104.65625. ..."
george2006 "price quote unit" maybe more clear.
Nikita yeah, how do you standardize quality ?
deelo where you have an underlying that can vary in "quality" (e.g. a commodity) this can be segmented into different grades.
gaur like oil can be specified arabian or texan..you can trade gold only of certain carrats etc
octavianus Answer D refers to the price of the underlying asset (a commodity), not the price of the futures contract
jainrajeshv Octavianus, I can't get you? can you explain it further
BunnyBaby Good one Octavianus, I didn't read that correctly!
viannie the only thing not standardized is the location to deliver the commodity ... which is not an option (no pun intended) in this question
Gooner7 Standardized quality example should be orange juice. If orange juice does not meet predetermined set of standards, that delivery is not considered proper settlement.
To-be-CFA Everything is standardized in futures. Period.
ankurwa10 Well said To-be-CFA. haha.
shalie Standardized-it's terms and conditions are precisely specified by the exchange.
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