43.In a forward contract, what is agreed upon at the outset? A. The delivery date B. The underlying asset C. The settlement amount D. The contract price
Question
43.In a forward contract, what is agreed upon at the outset? A. The delivery date B. The underlying asset C. The settlement amount D. The contract price
Solution
In a forward contract, the following are agreed upon at the outset:
A. The delivery date: This is the date when the underlying asset will be delivered. This is agreed upon at the beginning of the contract.
B. The underlying asset: This is the asset that is being traded in the contract. It could be a commodity, a financial instrument, or any other asset. The type and quantity of the asset are specified in the contract.
C. The settlement amount: This is not typically agreed upon at the outset. The settlement amount is usually determined at the end of the contract based on the price of the underlying asset at that time.
D. The contract price: This is the price at which the underlying asset will be bought or sold. This price is agreed upon at the beginning of the contract and remains fixed throughout the contract period.
So, the correct answer is A, B, and D. The delivery date, the underlying asset, and the contract price are all agreed upon at the outset in a forward contract.
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