Which of the Following Is a (Are)key Difference(s)a Manager Should

question 41

Multiple Choice

Which of the following is a (are) key difference(s) a manager should note in choosing between forward and futures contracts?

• A) Exchange trading makes forward contracts more liquid.
• B) Futures contracts carry standardized terms, while forward contracts can be tailored to meet specific needs.
• C) Futures contracts have greater default risk than forward contracts.
• D) Forward contracts require initial margin deposits and daily marking to market, while futures do not.

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Definitions:

MSC (Marginal Social Cost)

The total cost to society of producing an additional unit of a good or service, including both private costs and any externalities.

Positive Externality

A benefit received by individuals or society at large from an economic transaction in which they were not directly involved.

Vaccinating

The act of administering a vaccine to help the immune system develop protection from a disease.

Marginal Benefit

The enhancement in satisfaction or utility achieved by consuming an additional unit of a product or service.