A Forward Contract

question 56

Multiple Choice

A forward contract:

• A) fixes today the right to buy/sell an asset at a future date at a price to be determined at that future date.
• B) fixes today the right to buy/sell an asset at a future date at a price set today.
• C) fixes today the right to buy/sell an asset today at a price to be determined at a future date.
• D) fixes today the right to buy/sell an asset at a future date at a price to be determined at that future date,if the price has decreased.

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Definitions:

Money

A medium of exchange that facilitates the transfer of goods and services.

Average Accounting Return

A financial ratio indicating the average profitability of investments, calculated as the average annual net income divided by the average book value.

IRR

Internal Rate of Return, a metric used in financial analysis to estimate the profitability of potential investments.

Arbitrary Cutoff Number

A designated numerical limit set without a specific rationale or basis, often used for categorization or decision-making.