Forward transactions
A)allow savers and borrowers to conduct a transaction now and settle in the future.
B)allow savers and borrowers to postpone a transaction from now to the future.
C)always involve increased risk compared with spot transactions.
D)may not be conducted on organized exchanges.

Question

Quizplus · Accepted Answer

Forward transactions involve a contract between a saver and borrower to conduct a transaction at a specified future date, with the terms of the transaction agreed upon in advance. This allows for the transaction to be conducted now and settled in the future. This is beneficial for both parties as it allows them to plan ahead and manage their finances more effectively. Forward transactions may be conducted on organized exchanges, but can also be conducted through private contracts between parties. While there is always some level of risk involved in any financial transaction, with forward transactions the risk can be minimized by carefully selecting a counterparty and setting appropriate terms for the transaction.

Forward Transactions