What Is a Difference Between a Forward Contract and a Future

question 116

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).
• E)Delivery of the underlying asset almost always occurs on a futures contract but almost never occurs on a forward contract.

Comprehend the significance of ethical practices for business success.

Recognize the role of innovation, risk-taking, and strategic alliances in entrepreneurship and business strategy.

Understand the concept of portfolio standard deviation and how it is affected by different types of stocks and their weightings.

Calculate expected returns on various financial instruments including stocks and portfolios.

---

Definitions:

Control

The power to influence or direct behavior and the course of events in a business or organization.

Incredible Tenacity

Exceptional determination and persistence in facing obstacles or pursuing goals.

Small Business Owner

An individual who owns and operates a business entity which is usually defined by a lower number of employees or lower revenue compared to regular-sized corporations or businesses.

Vision For The Future

A strategic foresight or aspiration that frames an organization’s or individual's desired direction and objectives for the long-term.