A Forward Contract

question 75

Multiple Choice

A forward contract

• A)has more credit risk than a futures contract.
• B)is more standardized than a futures contract.
• C)is marked to market more frequently than a futures contract.
• D)has a shorter time to delivery than a futures contract.

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Definitions:

Market for Euros

A foreign exchange market where Euros are traded against other currencies.

U.S. Dollar

The official currency of the United States, widely used as a benchmark in international trade and considered a key global reserve currency.

Flexible Exchange-Rate System

A currency valuation system where the value of a currency is allowed to fluctuate in response to foreign exchange market mechanisms.

Foreign-Exchange Reserves

Stockpiles of foreign currencies maintained by a nation’s central bank. Obtained when the central bank sells local currency in exchange for foreign currency in the foreign exchange market.