Which of the following observations is true of forward contracts?
A) Substantial margin is required to initiate a contract.
B) Must be completed either with the underlying's future delivery or net cash settlement.
C) Cannot be customized; for a specific amount at a specific date.
D) Usually settled with a net cash amount prior to maturity date.

Question

Quizplus · Accepted Answer

Forward contracts must be completed either with the underlying's future delivery or net cash settlement. Substantial margin is not necessarily required to initiate a contract, and forward contracts can be customized for a specific amount at a specific date. Forward contracts are usually settled with physical delivery or offsetting cash trades at maturity.

Which of the Following Observations Is True of Forward Contracts