Forward contracts can be used either to hedge or to speculate.These actions:
A)increase risk in both cases.
B)decrease risk in both cases.
C)spread or minimize risk in both cases.
D)none of the above.

Question

Quizplus · Accepted Answer

Forward contracts can be used to spread or minimize risk in both cases of hedging or speculating. When used for hedging, they help to mitigate the risk of adverse price movements in the future by locking in a price for an underlying asset, while when used for speculating, they can allow investors to take on additional risk in pursuit of potential profits.

Forward Contracts Can Be Used Either to Hedge or to Speculate.These