A forward contract hedge is very similar to a futures contract hedge, except that ____ contracts are commonly used for ____ transactions.
A) forward; small
B) futures; large
C) forward; large
D) none of the above

Question

Quizplus · Accepted Answer

Forward contracts are commonly used for large transactions, as they can be customized to the specific needs of the parties involved. Futures contracts, on the other hand, are standardized and usually traded on an exchange. Therefore, choice C is the best answer as it correctly identifies the commonly used contract type and the typical transaction size for which it is used.

A Forward Contract Hedge Is Very Similar to a Futures