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Essentials Of Investments
Found in: Page 589
Essentials Of Investments

Essentials Of Investments

Book edition 9th
Author(s) Zvi Bodie, Alex Kane, Alan Marcus, Alan J. Marcus
Pages 748 pages
ISBN 9780078034695

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Short Answer

Why might individuals purchase futures contracts rather than the underlying asset?


Lower transaction cost, ease to alter holding and ability to buy on margin

See the step by step solution

Step by Step Solution

Step 1: Definition of underlying assets:

The financial assets from which derivative instruments like option, future contract, forward contract, etc extract its value is underlying assets.

Step 2: Advantages of futures’ contract

Following are the advantages of futures contracts over underlying assets:

a. The ability to buy on margin

b. Ease to alter holdings

c. Lower transaction cost

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