Despite the Fact That Forward Contracts Carry More Credit Risk

question 59

Multiple Choice

Despite the fact that forward contracts carry more credit risk than futures contracts,forward contracts offer what primary advantage over futures contracts?

• A)the over-the-counter forward market is a highly regulated market
• B)forward contracts prevent the writer from assuming the credit risk of the buyer
• C)terms and conditions are tailored to the specific needs of the two parties involved
• D)transaction information between the two parties involved in the forward contract is readily available to the public
• E)conditions of the forward contract,such as delivery date and location,cannot be altered

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Definitions:

Variable Cost

Expenses that fluctuate based on the volume of goods or services a company generates, including materials and labor.

Quantity

Quantity refers to the amount or number of a material or immaterial entity that is measured or quantifiable.

Average Variable Cost

Average Variable Cost is the total variable cost of production divided by the quantity of output produced, representing the variable cost per unit of output.

Variable Cost

Costs that are directly proportional to the level of output or production.