Question

68.0% complete This is a Single Choice Question; skip ahead to question content A B C Confidence Level: LowMediumHigh Confirm Q. On June 1, the price of Brent Crude Oil was US$90. On that day, an investor purchased a Brent Crude Oil futures contract with a price of US$100 for delivery in September. On the contract's delivery date, Brent Crude Oil is priced at US$95. What is the total cost of oil for the investor at expiration? $90 $95 $100

Answer 1

A futures contract is standardized contract traded on the exchange. The futures contract is different from a forward contract in the sense that its terms are standardized and exchange minimizes the counterparty risk through its mechanism.
A market participant can lock-in the rate for the buying or selling purpose of an asset. If a market participant buys the futures contract which is considered as a 'long position' then he will receive underlying asset at the price mentioned in the contract.

In the above question, the investor has purchased the futures contract of crude oil with a price of $100.
So the investors will have to pay $100 at the expiry of the contract even if the spot price at the expiry is $95.