Which of the following does not include a derivative?a.a buyer of index futures who anticipates an increase in the index.b.a foreign exporter making a dollar sale on the open marketc.a farmer who will later sell his harvestd.A copper fabricator buying his annual needs for copper through futures contracts.
Question
Which of the following does not include a derivative?a.a buyer of index futures who anticipates an increase in the index.b.a foreign exporter making a dollar sale on the open marketc.a farmer who will later sell his harvestd.A copper fabricator buying his annual needs for copper through futures contracts.
Solution
The option that does not include a derivative is: b. a foreign exporter making a dollar sale on the open market.
Here's why:
a. A buyer of index futures is using a derivative because futures contracts are a type of derivative.
b. A foreign exporter making a dollar sale on the open market is not using a derivative. They are simply exchanging one currency for another at the current market rate.
c. A farmer who will later sell his harvest could be using a derivative if they are using futures contracts to lock in a price now for crops they will sell in the future.
d. A copper fabricator buying his annual needs for copper through futures contracts is using a derivative because, again, futures contracts are a type of derivative.
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