There Are a Number of Differences Between Forward and Futures

question 101

Multiple Choice

There are a number of differences between forward and futures contracts.Which of the following statements is false?

• A) Futures have less liquidity risk than forward contracts.
• B) Futures have less credit risk than forward contracts.
• C) Futures have more default risk than forward contracts.
• D) In futures, the exchange becomes the counterparty to all transactions.
• E) None of the above (that is, all statements are true)

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Definitions:

Tread

The rubber on the circumference of a tire that makes contact with the road surface, designed with patterns that affect traction and wear performance.

Rotating Tires

The process of changing the position of a vehicle's tires to promote even wear and extend their lifespan.

Radial Tires

Tires constructed with layers of fabric cords positioned at right angles to the circumference, providing improved performance and durability.

Circumference

The linear distance around the edge of a circle or a cylindrical object.