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Question of the Week - Derivatives

AdaptPrepAdaptPrep Des Moines, IA, USAPosts: 211 Sr Associate
edited February 2015 in Level 1 Questions
In April, a farmer goes to the local co-op and puts together a contract agreeing to sell 10,000 bushels of corn at $6.50 a bushel on November 1. This type of an agreement is best described as a:

Question of the Week - Derivatives 54 votes

Forward contract
77%
LeChiffreAndrewKokAdaptPrepdesantolwm247rsparksiNancynitinRandallK27lkumarbnbhalb691ivana_b14thendry7JakeconomicsAnassujanardxShooterMcGavin_21mariagcompolongo 42 votes
Futures contract
22%
sethnehasmdekhaneNedoroverfanclubanchalfjayArsenalFanSKBapoorvaHugo_Pintosophiamullerewmsandiego 12 votes
Swap
0%

Comments

  • AdaptPrepAdaptPrep Des Moines, IA, USAPosts: 211 Sr Associate
    Forward contract

    This is a forward contract, an agreement between two parties to sell an asset at a certain price at a certain time.

    Futures contracts are more standardized and bought and sold on an exchange.

    Swaps are a series of forward contracts. While the case could be made that a forward contract is just a single-series swap, the description best describes forward contracts.

    smdekhanewm247
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