The Advantage of Forward Contracts Over Futures Contracts Is That

question 84

Multiple Choice

The advantage of forward contracts over futures contracts is that forward contracts

• A) are standardized.
• B) have lower default risk.
• C) are more liquid.
• D) are none of the above.

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Definitions:

CAPM

The Capital Asset Pricing Model, a theory that describes the relationship between systematic risk and expected return for assets, often used in the pricing of risky securities.

Financial Managers

Professionals responsible for managing the financial health of an organization, including planning, organizing, controlling, and monitoring financial resources.

Time-Weighted Returns

An investment performance measure that eliminates the influence of cash flows into or out of the portfolio, focusing solely on the manager's performance.

Geometric Average Return

The average rate of return on an investment that is compounded over multiple periods, considering the compounding effect.