Question

Compared to forward contracts, futures contracts are least likely to be:

Select one:

a. standardized.

b. larger in size.

c. less subject to default risk.

Answer 1

Compared to forward contracts, futures contracts are least likely to be: larger in size.

Option a is incorrect because futures contracts are most likely to be standardized compared to forward contracts. The opposite is true. Forward contracts are least likely to be standardized and most likely to be customized.

Option c is incorrect because futures contracts are most likely to be less subject to default risk compared to forward contracts. Forward contracts are most likely to be subject to default risk.

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