The Key Difference Between a Forward and a Futures Contract

question 121

Multiple Choice

The key difference between a forward and a futures contract is:

• A)A forward contract is customized where a futures contract is not.
• B)A forward contract is bought and sold on organized exchanges.
• C)Only the forward contracts have settlement dates.
• D)The amount of time involved.

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Definitions:

Rate of Return

The Rate of Return (RoR) is a financial metric used to measure the profitability of an investment, representing the percentage of profit or loss relative to the investment's original cost.

Variable Direct Materials Cost

Refers to the fluctuating cost of raw materials that directly goes into producing a product, changing as the volume of production varies.

Contribution Margin

The amount by which the sale of a product exceeds its variable costs, contributing to covering fixed costs and generating profit.

Activity Rate

The estimated activity cost divided by estimated activity-base usage.