Which of the Following Is the Best Definition of Forward

question 218

Multiple Choice

Which of the following is the best definition of forward contract?

• A) Long-term financial risk arising from permanent changes in prices or other economic fundamentals.
• B) A legally binding agreement between two parties calling for the sale of an asset or product in the future at a price agreed upon today.
• C) A forward contract with the feature that gains and losses are realized each day rather than only on the settlement date.
• D) Reducing a firm's exposure to price or rate fluctuations.
• E) An agreement that gives the owner the right, but not the obligation, to buy or sell a specific asset at a specific price for a set period of time.

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Definitions:

Unilateral Contract

A type of agreement where an offer can only be accepted through the performance of an action by the party receiving the offer.

Hard Drive

A data storage device used for storing and retrieving digital information using rapidly rotating disks coated with magnetic material.

Adequacy Of Consideration

The sufficiency of what is exchanged in a contract to make the agreement enforceable, ensuring each party receives something of value.

Bankruptcy

A legal procedure for dealing with debt problems of individuals and businesses; officially declared inability to pay outstanding debts.