The Buyer of a Forward Contract on Wheat Benefits If

question 229

Multiple Choice

The buyer of a forward contract on wheat benefits if the price of wheat _____ while the seller of the contract benefits if the price of wheat _____.

• A) decreases; remains constant
• B) decreases; decreases
• C) decreases; increases
• D) increases; decreases
• E) remains constant; increases

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Definitions:

Unrealized Loss

A loss that results from holding onto an asset that has decreased in price, not yet realized through selling.

Realized Gain

The profit made from the sale of an asset or investment which has been sold for more than its purchase price.

Market Value

The present rate at which a good or service is available for purchase or sale in the open marketplace.

Common Stock

A form of corporate equity ownership, a type of security representing an ownership interest in a corporation.