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Questions and Answers
What is the primary purpose of entering into a forward contract?
What is the primary purpose of entering into a forward contract?
- To increase liquidity in the market
- To list the contract on exchanges
- To speculate on the future price of an asset
- To fix the price and avoid price risk (correct)
What happens if the spot price is higher than the forward price in a forward contract?
What happens if the spot price is higher than the forward price in a forward contract?
- There is no impact on the contract
- The contract gets listed on exchanges
- The contract becomes favorable
- The contract becomes unfavorable (correct)
Why do other market participants find it difficult to access forwards contracts?
Why do other market participants find it difficult to access forwards contracts?
- They are tailor-made contracts (correct)
- They are traded on exchanges
- They are standardized contracts
- They are highly regulated contracts
What risk arises due to the tailor-made nature of forward contracts?
What risk arises due to the tailor-made nature of forward contracts?
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In a forward contract, what is the net profit per 10 grams if you buy gold at Rs. 62,337 and sell it at Rs. 62,700?
In a forward contract, what is the net profit per 10 grams if you buy gold at Rs. 62,337 and sell it at Rs. 62,700?
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What factor contributes to illiquidity in forward contracts?
What factor contributes to illiquidity in forward contracts?
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Which risk refers to the ability of market participants to buy or sell an underlying asset?
Which risk refers to the ability of market participants to buy or sell an underlying asset?
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What makes it challenging for other market participants to easily access forward contracts?
What makes it challenging for other market participants to easily access forward contracts?
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