A forward contract may be used for
A)Hedging price exposure at a future date.
B)Speculating on price.
C)Locking-in a price for a future transaction.
D)All of the above.

Question

Quizplus · Accepted Answer

A forward contract can be used for all three purposes - hedging, speculating, and locking-in a price. Hedging involves taking a position to offset potential losses from adverse price movements, while speculating involves taking a position to profit from expected price movements. Locking-in a price involves fixing the price at which a transaction will occur in the future, providing certainty and reducing uncertainty over future prices.

A Forward Contract May Be Used for