Major Disadvantage of Forward and Futures Contracts Relative to Options

question 14

Multiple Choice

major disadvantage of forward and futures contracts relative to options is that the forwards and futures contracts

• A)cannot protect the holder against the risk of adverse movements in exchange rates
• B)are more expensive
• C)are available only for relatively short maturities
• D)eliminate the possibility of gaining a windfall profit from favorable movements in exchange rates

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Definitions:

Non-Controlling Interest

A minority share in a company's equity not sufficient to exert control over the company.

Intercompany Land Sales

Transactions involving the sale of land between companies that are part of the same corporate group.

Realized

Pertains to gains or losses that have been converted into actual cash or other equivalents through the sale or completion of a transaction.

Legal Ownership

Refers to the formal and recognized ownership of an asset, property, or entity according to law.