Canadian Securities Course (CSC) Level 1 Test 2025 – 400 Free Practice Questions to Pass the Exam

A cash-settled future is utilized when the futures contract is based on assets that are difficult to physically deliver. In this scenario, instead of exchanging the actual underlying asset upon the contract's expiration, the difference between the contract price and the market price is settled in cash. This method is applied to financial instruments or assets that may not be easily deliverable physically, such as stock indices or interest rates.

Options A, B, and D are not the correct choices because they do not accurately represent the typical circumstances when a cash-settled future would be used. The feasibility of physical delivery, the nature of the commodity, or the investment purpose do not directly determine the use of cash-settled futures.