Forward Contracts Are Often Illiquid Because

question 3

Multiple Choice

Forward contracts are often illiquid because

• A)any capital gains on them are heavily taxed, making investors reluctant to sell them.
• B)government regulation has not provided for a secondary market in them.
• C)they generally contain terms specific to the particular buyer and seller.
• D)the brokerage fees involved in buying and selling them are very high.

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Definitions:

Common Stock

A type of security that represents ownership in a corporation, entitling the holder to a share of the company’s assets and profits.

Dividends

Periodic payments made to shareholders, reflecting a portion of a company's profit.

Preferred Shares

A class of ownership in a corporation that has a higher claim on assets and earnings than common shares, often receiving dividends before common shareholders.

Common Stock

A type of equity security that represents ownership in a corporation, entitling the holder to vote on corporate matters and receive dividends.