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1.A one-year forward contract is an agreement where
A.One side has the right to buy an asset for a certain price in one year’s time.
B.One side has the obligation to buy an asset for a certain price in one year’s time.
C.One side has the obligation to buy an asset for a certain price at some time during the next year.
D.One side has the obligation to buy an asset for the market price in one year’s time.

Answer: B
A one-year forward contract is an obligation to buy or sell in one year’s time for a predetermined price. By contrast, an option is the right to buy or sell.

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CurtisBrown (28.11.2024)

A one-year forward contract obligates one party to buy an asset at a predetermined price in a year, contrasting with an option, which provides the right but not the obligation. It's like navigating through http://geometrydashjump.com/ where each level represents a different financial instrument, and understanding these contracts helps you avoid pitfalls and reach your goals.

RoseBL (21.10.2024)

Thank you for providing this clear explanation of a one-year forward contract, which highlights the obligation to buy or sell at a predetermined price. Your clarification is greatly appreciated!
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annastark (15.04.2024)

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Flashcard info:

Author: CoboCards-User

Main topic: Finance & Investment

Topic: Derivatives

Published: 27.10.2015

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