A Disadvantage of Forward Contracts Is That

question 47

Multiple Choice

A disadvantage of forward contracts is that

• A)there is a possibility that one party to the agreement may default.
• B)sellers are prevented from hedging.
• C)buyers are prevented from hedging.
• D)sellers are prevented from speculating.

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Definitions:

Insurer

A company or entity which provides insurance coverage to individuals or organizations against potential losses or damages.

Defenses

Legal strategies and arguments used in court to negate, justify, or excuse alleged criminal or civil liabilities.

Judgment Pro Rata

A legal principle where the amount awarded or decided in judgment is distributed proportionally among creditors or claimants based on the size of their claims.

Personal Property

Assets or belongings that are not attached to or part of real estate; movable property.