1. A forward contract: a. Is a commitment to buy or sell a specified quantity of

Question

1. A forward contract: a. Is a commitment to buy or sell a specified quantity of an asset or commodity at a specified price and future date b. Is an option to buy or sell a specified quantity of an asset or commodity at a specified price and future date c. Is traded on organized exchanges d. Allows for the quantity or price of the transaction to fluctuate over time A futures contract: a. Is not similar to a forward contract for accounting purposes 2. b. Is not traded on an organized exchange c. Is traded on an organized exchange d. None of the above are true 3. Net settlement means that: a. Neither party is required to deliver an asset. b. One or both parties are required to deliver an asset. c. Both parties are required to deliver an asset. d. None of the above 4. Which of the following is true of a firm commitment? a. The agreement specifies all significant terms. b. The agreement includes a disincentive for nonperformance that is sufficiently large to make performance probable. c. Neither of the above is true d. Both a and b are true. 5. Fair value risks generally relate to which of the following? a. Risks relating to forecasted transactions b. Unrecognized firm commitments c. Risks relating to fluctuations in the market price of the company's own stock d. None of the above

Explanation / Answer

1. Option A is correct

Is a commitment to buy or sell......

Explanation

A forward contract is a agreement between two parties which gives buyer an obligation to purchase an asset and the seller , an obligation to sell an asset, at a set price at a future point in time. Forward contract are not traded on an exchange.

2. C

3.a

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