The seller of a forward contract: has the option of either making delivery or ac
ID: 2647816 • Letter: T
Question
The seller of a forward contract:
has the option of either making delivery or accepting delivery.
is obligated to make delivery and accept the forward price.
is obligated to take delivery and pay the forward price.
is obligated to take delivery and pays the lower of the spot market price or the contract price.
has the option of making delivery and receiving the greater of the spot price or the contract price.
a.has the option of either making delivery or accepting delivery.
b.is obligated to make delivery and accept the forward price.
c.is obligated to take delivery and pay the forward price.
d.is obligated to take delivery and pays the lower of the spot market price or the contract price.
e.has the option of making delivery and receiving the greater of the spot price or the contract price.
Explanation / Answer
ANSWER:
Option (c) is obligated to take delivery and pay the forward price.
A Forward Contract is a way for a buyer or a seller to lock in a purchasing or selling price for an asset, with the transaction set to occur in the future.
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