Which One of the Following Is True Regarding Forward Contracts

question 35

Multiple Choice

Which one of the following is true regarding forward contracts?

• A) The upfront costs to enter a forward contract can be significant.
• B) If a buyer of a forward contract earns a $200 profit, then the seller will also profit by $200.
• C) The buyer wins when market prices are less than the forward price.
• D) The payoff profile for the buyer of a forward contract is an upward sloping linear function.
• E) If the seller of a forward contract earns a profit, then the buyer has neither a profit nor a loss.

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Definitions:

Rinpa

A style of Japanese painting and decorative arts that emerged in the 17th century, characterized by the use of vibrant colors and nature themes.

Nishiki-E

A type of multi-colored woodblock printing in Japan, known for its vibrancy and detail, developed during the Edo period.

Byobu

Japanese painted folding screens.

Ashikaga Clan

A prominent Japanese samurai clan that established the Ashikaga shogunate and ruled Japan during the Muromachi period (1336–1573).