Question

Commodity forward contracts differ from financial forwards in the following manner:

1-The underlying asset in a commodity forward is an asset that may be used in production and that gets consumed in the process.

2-Commodity forwards are always more costly than financial forwards when the spot assets have the same prices.

3-Commodity forwards have physical delivery whereas financial forwards have cash delivery.

4-Commodity forwards do not have inconvenience yields whereas financial forwards do.

Answer 1

The Correct option is A

The Commodity forward contracts refers tot he contract between two parties to buy and sell the commodities at a certain price in a future period of time, The underlying assets in the commodity forwards are the commodities like Wheat, Rice, Oil etc., These contracts are not traded on the stock exchanges rather they are privately settled among the parties and the underlying assets can be used in production and consumed during the process.