Question

Which of the following statements about forward contracts is least accurate? Select one: a. The long...

Which of the following statements about forward contracts is least accurate?

Select one:

a. The long promises to purchase the assets.

b. A forward contract can be exercised at any time.

c. Both parties to a forward contract have potential default risk.

Homework Answers

Answer #1

Answer: Option "b" is least accurate.

Forward contract- It is a derivative contract between two parties to buy or sell a particular asset at a specified price and at a specific date in future.

Long forward contract promises to purchase the asset, short forward contract promises to deliver the asset. Both parties have default risk as any one party may default in paying or delivering the asset. Forward contracts are customized contracts and traded Over the counter.

But forward contract cannot be exercised anytime. They can only be exercised at specified time in future.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Which of the following statements regarding long-term supply contracts is FALSE? Select one: A. Long-term supply...
Which of the following statements regarding long-term supply contracts is FALSE? Select one: A. Long-term supply contracts insulate the firms from commodity price risk. B. Long-term supply contracts are designed to eliminate credit risk. C. The market value of the contract at any point in time may not be easy to determine, making it difficult to track gains and losses. D. Long-term supply contracts are bilateral contracts negotiated by a buyer and a seller.
Compared to forward contracts, futures contracts are least likely to be: Select one: a. standardized. b....
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.
Which of the following statements is (are) correct? More than one answer is possible. a. Futures...
Which of the following statements is (are) correct? More than one answer is possible. a. Futures contract are marked to market daily. b. Forward contracts are default free c. Goods rarely are delivered on futures contract. d. Futures contract don't have any margin requirements.
Which one of these statements about PCR, or polymerase chain reaction testing, is LEAST true? Select...
Which one of these statements about PCR, or polymerase chain reaction testing, is LEAST true? Select one: a. Testing can be done using very small amounts of material b. Testing is simple, cheap, and “Old school”, not requiring any sophisticated technology c. Testing with this method yields remarkably accurate results d. Important information can be obtained and utilized in a relatively short period of time
ou have the following information about forward and options contracts on the same stock. All derivatives...
ou have the following information about forward and options contracts on the same stock. All derivatives have one-year maturity. Risk-free rate is 10%. S0 = $45.25, F0,1 = $50, CK=45 = $7.70, CK=45 = $5.40, PK=45 = $3.20, and PK=50 = $5.40. What is the payoff if you hedge a long position of the stock with a forward contract if the stock price at maturity is $47?
1. Which of the following statements regarding futures contracts is false? a)      Both the buyer and...
1. Which of the following statements regarding futures contracts is false? a)      Both the buyer and the seller can get out of the contract at any time by selling it to a third party at the current market price. b)      Futures prices are not prices that are paid today. Rather, they are prices agreed to today, to be paid in the future. c)      Futures contracts are traded anonymously on an exchange at a publicly observed market price and are generally...
Which of the following statements regarding club deals is least accurate? Club deals: Select one: a....
Which of the following statements regarding club deals is least accurate? Club deals: Select one: a. provide a competitive opportunity for weak private equity firms b. offer increased returns for investors c. offer diversification benefits to participating private equity firms d. provide an investment opportunity when private equity capital is scarce
Which of the following statements regarding club deals is least accurate? Club deals: Select one: a....
Which of the following statements regarding club deals is least accurate? Club deals: Select one: a. provide a competitive opportunity for weak private equity firms b. offer increased returns for investors c. offer diversification benefits to participating private equity firms d. provide an investment opportunity when private equity capital is scarce
Which of the following is an advantage of hedging with options instead of forward​ contracts? A....
Which of the following is an advantage of hedging with options instead of forward​ contracts? A. Options prices tend to be lower than forward prices. B. Options allow investors to purchase a forward contract at a later date. C. If the price moves in the opposite direction to the one hedged​ against, the hedger can decline to exercise the option and limit the loss to what was paid for the option. D. If the price moves in the direction of...
You have the following information about forward and options contracts on the same stock. All derivatives...
You have the following information about forward and options contracts on the same stock. All derivatives have one-year maturity. Risk-free rate is 10%. S0 = $45.25, F0,1 = $50, CK=45 = $7.70, CK=45 = $5.40, PK=45 = $3.20, and PK=50 = $5.40. What is the profit if you hedge a short position of the stock with a forward contract if the stock price at maturity is $47? Group of answer choices