A forward contract on wheat:
A) Obligates the buyer to purchase a stated quantity of wheat at a specified price on a specified date.
B) Obligates the seller to pay the buyer the difference between the market price and the forward price on the settlement date.
C) Requires the buyer to mark-to-market on a daily basis.
D) Requires both the buyer and the seller to resettle on a daily basis.
E) Obligates the seller to deliver to the buyer the stated quantity of wheat on the day of the buyer's choosing up to and including the expiration day.

Question

Quizplus · Accepted Answer

A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date. It obligates the buyer to purchase and the seller to sell the specified asset at the agreed-upon price, regardless of the market price at the time of contract settlement.

A Forward Contract on Wheat