Question

What is the primary characteristic of a forward contract regarding the exchange of money?

a.

Both parties exchange money at the time of entering into the contract.

b.

Money exchange occurs on the execution date when the buyer pays, and the seller delivers the underlying asset.

c.

The buyer pays cash upfront at the time of entering into the contract.

d.

There is no exchange of money in a forward contract.

Posted under IC 89 Management Accounting

Answer: (b).Money exchange occurs on the execution date when the buyer pays, and the seller delivers the underlying asset. Explanation:In a forward contract, no exchange of money takes place until the execution date when the buyer pays the cash, and the seller delivers the underlying asset.

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Q. What is the primary characteristic of a forward contract regarding the exchange of money?
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