The Difference Between a Forward Contract and a Futures Contract

question 134

Multiple Choice

The difference between a forward contract and a futures contract is:

• A) The fact that the futures contract does not obligate the buyer while the forward contract does.
• B) The fact that a forward contract must be paid in full at the onset while the futures contract does not.
• C) The daily resettlement feature found in futures contracts but not in forward contracts.
• D) The fact that a futures contract is a form of an option contract and a forward contract is not.
• E) The fact that the forward contract is marked-to-the-market and the futures contract is not.

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Definitions:

P Value

A statistical measure that helps scientists determine the significance of their research results, reflecting the likelihood that the observed data could occur by chance.

Mean

A statistical measure that represents the arithmetic average of a set of numbers.

Statistically Significant

A term used to describe a result that is unlikely to have occurred by chance alone, according to a predetermined threshold of probability.

Variation

The occurrence of differences among individuals within a population, due to genetic differences or environmental factors.