Which of the Following Statements Is NOT Correct Regarding Forward

question 41

Multiple Choice

Which of the following statements is NOT correct regarding forward contracts?

• A)They are typically negotiated with a commercial bank
• B)They are standardized contracts that represent a standard number of units and have a specific maturity date.
• C)They are sometimes referred to in terms of their percentage premium or discount.
• D)They can be used to hedge a corporation's risk that a currency's value may appreciate or depreciate over time.

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Definitions:

Rate of Return

The gain or loss on an investment over a specified time period, expressed as a percentage of the investment's initial cost.

Assets

Items of value owned by individuals, companies, or governments, including tangible items like real estate and equipment, and intangible items like patents and trademarks.

Explicit Cost

Direct, out-of-pocket payments for goods or services that a company incurs in the course of doing business.

Economic Profit

The difference between the total revenue received by a firm and the total cost of all resources used, including opportunity costs.