What Is a Difference Between a Forward Contract and a Future

question 60

Multiple Choice

What is a difference between a forward contract and a future contract?

• A)The settlement price of a forward contract is fixed over the life of the contract but in a futures contract is marked to market daily.
• B)Forward contracts are normally arranged through an organized exchange,while most futures contracts are OTC contracts.
• C)Both are essentially the same,except for trading volumes which are higher for futures contracts.
• D)Both are essentially the same,except for the fact that the terms of a forward contract is set by the exchange,subject to the approval of the Commodity Futures Trading Commission (CFTC).

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Definitions:

Cardinal Trait

A personality characteristic that is so dominant in an individual's personality that it influences nearly every act; according to Gordon Allport’s theory of personality.

Ruling Passion

A dominant interest or driving force that significantly influences a person's decisions and actions throughout their life.

Common Traits

Traits possessed in some degree by all persons.

Culture

The shared values, traditions, norms, customs, arts, history, folklore, and institutions of a group of people that are passed through generations.