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Question 4 Which of the following is correct? A short forward contract … is a commitment...

Question 4

Which of the following is correct? A short forward contract …

is a commitment to sell an asset for a certain price in the future.

is a commitment to buy an asset for a certain price today.

is a commitment to buy an asset for a certain price in the future.

gives the right but not the obligation to buy an asset for a certain price.

gives the right but not the obligation to sell an asset for a certain price.
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Homework Answers

Answer #1

Correct Answer is option A
Other options are incorrect
Short Forward contract is a commitment to sell an asset for a certain price in the future.
Forward contract is a type of derivative contract, contract between two parties to buy or sell the asset at a specified date or price agreed today.
Short forward contract means selling the forward contract on a specified future date at a price which is decided today.

In Option - Options gives buyer the right, bot the obligation to buy or sell underlying the asset

I hope this clear your doubt.

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