This morning a national bakery agreed to pay a farmer $7.10 a bushel for 5,000 bushels of wheat that the farmer will deliver to the bakery four months from now. Payment will be made at the time of delivery. What is this legally binding agreement called?

Question

Quizplus · Accepted Answer

A forward contract is an agreement between two parties to buy or sell an asset at a specified price and date in the future. In this case, the national bakery has agreed to buy wheat from the farmer at a specified price ($7.10 per bushel) and date (four months from now), which is a forward contract. The payment will be made at the time of delivery. Therefore, option B, C, D, and E are not the correct choices.

This Morning a National Bakery Agreed to Pay a Farmer