Which of the Following Is NOT an Attribute of a Forward

question 41

Multiple Choice

Which of the following is NOT an attribute of a forward of futures contract?

• A) Because futures contracts are between anonymous parties, there is a risk of default as each party may not be in a position to assess the credit worthiness of the other party .
• B) Since a forward contract is only a customary agreement between non-anonymous parties, there is a risk that one party may default if future prices deviate materially from the contracted price.
• C) By alternatively using a future contract rather than a forward contract, the risk of default is eliminated.
• D) In the case of a forward contract where the contract is negotiated with a known party, a firm may be disclosing strategic information regarding its risk exposure.

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Definitions:

Secondary Emotion

Emotions that develop with more cognitive processing and social learning, such as guilt or shame, as opposed to primary emotions like happiness or fear.

Remorseful

Feeling deep regret or guilt for a wrongdoing, similar to being penitent or contrite.

Remorse

A deep feeling of regret or guilt for a wrong committed, often accompanied by a desire to amend or repair the harm caused.

Cannon-Bard

A theory of emotion that proposes that emotional and physiological responses to stimuli occur simultaneously rather than sequentially.