The main difference between a forward contract and a cash transaction is:
A)a forward contract provides an option while a cash transaction is an obligation.
B)a forward contract is fulfilled at a later date while the cash transaction is carried out immediately.
C)the price of a forward contract is decided at a later date while a cash transaction occurs at the current spot rate.
D)a cash transaction can be reversed but a forward contract cannot.
E)the forward contract can be negotiated while a cash transaction cannot.

Question

Quizplus · Accepted Answer

The main difference between a forward contract and a cash transaction is the timing of fulfillment. A forward contract is an agreement to buy or sell an asset at a later date for a predetermined price, while a cash transaction is carried out immediately at the current spot rate. Therefore, the correct answer is B, as it accurately reflects this difference between the two types of transactions.

The Main Difference Between a Forward Contract and a Cash