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A forward contract is similar to an option contract because they both:_______
A) Can provide insurance against the price of the underlying stock
B) Are paid for up front in the form of premiums
C) Are paid for at the end of the contract in the form of premiums
D) Require a future settlement payment
E) None of the above

Respuesta :

Answer:

D) Require a future settlement payment

Explanation:

The derivative contract that involves agreement between two persons and declares that the buyer agrees to buy an asset from the seller at a specific date but for a preset price is called forward contract. While in a preset contract gives the buyer the right to sell an asset at a preset expiration date. The asset could be share of stock or commodity.

The similarity between both the contract is that the buyer can pay the settlement payment in future as mentioned in the contract.

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