Which One of These Statements Related to Forward Contracts Is

question 6

Multiple Choice

Which one of these statements related to forward contracts is correct?

• A) The buyer of a forward contract on corn benefits if the price of corn increases during the contract period.
• B) The buyer of a forward contract has the right, but not the obligation, to execute the contract any time up to and including the settlement date.
• C) Forward contracts cannot be sold but must be executed by the original parties to the contract.
• D) Forward contracts recognize profits and losses on a daily basis.
• E) The price at which a forward contract closes is set equal to the closing spot price on the settlement date.

---

Definitions:

Pitch Cone

In gear design, it is the imaginary cone that represents the underlying angular surface of the teeth, where the pitch surface of an infinitely small gear would be.

Conical Surface

A surface that extends outward and away in all directions from a common point, resembling the shape of a cone.

Frustum

A truncated shape that results from cutting a pyramid or cone with a plane parallel to its base, leaving two bases, one smaller than the other.

Pitch Angle

The angle between the helix of a thread or gear on a cylindrical shaft and an imaginary line perpendicular to the shaft's axis.