SOFA-CFE · Question #110
An agreement (other than a future) to exchange, at a specified future date and price, underlying interests is called:
The correct answer is B. Forward. Forward contracts are non-standardized agreements between two parties to buy or sell an underlying asset at a predetermined price on a specific future date - exactly what the question describes. Unlike futures, forwards are traded over-the-counter (OTC), are privately…
Question
An agreement (other than a future) to exchange, at a specified future date and price, underlying interests is called:
Options
- APresent
- BForward
- CForeign
- DNone of the above
How the community answered
(31 responses)- A6% (2)
- B77% (24)
- C13% (4)
- D3% (1)
Explanation
Forward contracts are non-standardized agreements between two parties to buy or sell an underlying asset at a predetermined price on a specific future date - exactly what the question describes. Unlike futures, forwards are traded over-the-counter (OTC), are privately negotiated, and are not exchange-traded or standardized. Option A ("Present") is incorrect because the exchange happens at a future date, not now. Option C ("Foreign") describes a geographic origin, not a financial instrument type. Option D is wrong because a correct answer (B) exists.
Memory tip: Think "Forward = Future delivery, but Flexible" - forwards share the future-date concept with futures but lack the standardization, making them the customizable cousin of futures contracts.
Community Discussion
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