A forward contract is an agreement between two parties to buy or sell an asset at a future date at a price set today. The price is typically negotiated between the parties involved and is based on the current market price of the asset. Therefore, choice B is the correct option. Choices A, C, and D are incorrect because they do not accurately describe a forward contract.

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A Forward Contract

Question 28

Multiple Choice

A forward contract:

A) fixes today the right to buy/sell an asset at a future date at a price to be determined at that future date.
B) fixes today the right to buy/sell an asset at a future date at a price set today.
C) fixes today the right to buy/sell an asset today at a price to be determined at a future date.
D) fixes today the right to buy/sell an asset at a future date at a price to be determined at that future date,if the price has decreased.

Correct Answer: