Question

Q.4 Why is it necessary to go for futures markets? A. so that farmers can relax B. so that farmers can get good crops C. so that farmers can cultivate without risk D. so that government is out of danger Q.5 Select the option with the underlined​

Answer 1

Explanation:

Prices for farm products rise and fall due to changes in the supply or demand fundamentals, real or perceived, for that product. Periods of tight supplies usually cause high prices.

Farmers do not often have stored grain or marketable livestock on hand at a time when the price is high. Hedging, using futures contracts, is an alternative way to lock in prices in higher priced periods.

Answer 2

Explanation:

Futures and derivatives help increase the efficiency of the underlying market because they lower unforeseen costs of purchasing an asset outright. For example, it is much cheaper and more efficient to go long in S&P 500 futures than to replicate the index by purchasing every stock.