The main difference between a forward contract and a cash transaction is:
A) only the cash transaction creates an obligation to perform.
B) a forward is performed at a later date while the cash transaction is performed immediately.
C) only one involves a deliverable instrument.
D) neither allows for hedging.
E) None of these.

Question

Quizplus · Accepted Answer

A forward contract is an agreement to buy or sell an asset at a future date for a predetermined price. A cash transaction, on the other hand, is an immediate exchange of cash for goods or services. The main difference between the two is that a forward contract is performed at a later date, while a cash transaction is performed immediately.

The Main Difference Between a Forward Contract and a Cash