The buyer of a forward contract:
A) will be taking delivery of the good(s) today at today's price.
B) will be making delivery of the good(s) at a later date at that date's price.
C) will be making delivery of the good(s) today at today's price.
D) will be taking delivery of the good(s) at a later date at pre-specified price.
E) Both will be taking delivery of the good(s) today at today's price or will be taking delivery of the good(s) at a later date at pre-specified pricE.

Question

Quizplus · Accepted Answer

The buyer of a forward contract will be taking delivery of the good(s) at a later date at a pre-specified price. This is the entire purpose of a forward contract - to lock in a price for future delivery. Option A is incorrect because the buyer would not be taking delivery of the goods today, but rather at a later date. Option B is incorrect because the buyer would not be making delivery, but rather receiving delivery. Option C is also incorrect for the same reasons as option A. Option E is partially correct, but not complete as it does not specify that the price is pre-specified for future delivery.

The Buyer of a Forward Contract