22-47 A futures contract
A)is tailor-made to fit the needs of the buyer and the seller.
B)has more credit risk than a forward contract.
C)is marked to market more frequently than a forward contract.
D)has a shorter time to delivery than a forward contract.
E)has more price risk than a forward contract.

Question

Quizplus · Accepted Answer

Futures contracts are marked to market on a daily basis, while forward contracts are not. Therefore, futures contracts have more frequent mark-to-market requirements than forward contracts. The other options are incorrect: A) Futures contracts are standardized contracts, not tailor-made. B) Forward contracts typically have more credit risk than futures contracts because there is no daily mark-to-market requirement. D) The time to delivery can vary for both futures and forward contracts, depending on the agreement between the buyer and seller. E) Futures contracts typically have less price risk than forward contracts because they are standardized and traded on an exchange, providing greater liquidity and transparency.

22-47 a Futures Contract