Because of that requirement, a futures contract avoids the long-term contract's:
ACurrency risk
BCredit risk
CCapital risk
DCarriage risk
Answer & Solution
Correct answer: B. Credit risk
1. A supplier might simply fail to deliver.
2. The exchange stands behind the futures trade instead.
3. So the credit risk is avoided.
_Source: OpenStax Principles of Finance 2e, Chapter 20, Risk Management and the Financial Manager._
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