Which of the following statements about forwards is false?
A) No payment is typically made at inception of a forward contract.
B) A forward contract may be settled in cash at maturity.
C) A futures contract is like a forward contract that is exchange-traded.
D) The payoff at maturity from a long forward contract is always non-negative (either positive or zero).

Question

Quizplus · Accepted Answer

The payoff from a long forward contract can be negative if the price of the underlying asset at maturity is less than the forward price agreed upon at inception. This means the holder of the long position would have to buy the asset at a price higher than the market price, resulting in a loss.

Which of the Following Statements About Forwards Is False