Futures contracts differ from forward contracts in that
A) future contracts ensures you will receive a certain amount of foreign currency at a specified future date.
B) future contracts bind you into your end of the deal.
C) future contracts allow you to sell your contract on an organized futures exchange.
D) future contracts are a disadvantage if your views about the future spot exchange rate are to change.
E) futures contracts don't allow you to realize a profit or a loss right away.

Question

Quizplus · Accepted Answer

Unlike forward contracts, futures contracts can be bought and sold on an organized futures exchange, providing more flexibility to the parties involved. Option A is incorrect because forward contracts also ensure a certain amount of currency at a specified future date. Option B is incorrect because forward contracts also bind the parties into their agreement. Option D is incorrect because futures contracts can be settled before the specified date, allowing for views to change. Option E is incorrect because futures contracts do allow for realization of profit or loss.

Futures Contracts Differ from Forward Contracts in That