The buyer of a forward contract on wheat benefits if the price of wheat _____ while the seller of the contract benefits if the price of wheat _____.
A) decreases; remains constant
B) decreases; decreases
C) decreases; increases
D) increases; decreases
E) remains constant; increases

Question

Quizplus · Accepted Answer

The buyer of a forward contract on wheat benefits if the price of wheat increases because they can purchase it at the lower, previously agreed-upon price, thus gaining from the price difference. Conversely, the seller benefits if the price of wheat decreases because they can sell it at the higher, previously agreed-upon price, despite the market price being lower.

The Buyer of a Forward Contract on Wheat Benefits If