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Comparing forward and futures contracts, we can say that: a. forward contracts are traded on organized...

Comparing forward and futures contracts, we can say that:

a. forward contracts are traded on organized exchanges while futures contracts are traded over-the-counter.

b. forward contracts are standardized contracts while futures contracts are usually tailor-made.

c. delivery of the underlying asset is usually made in forward contracts and delivery of the underlying asset is seldom made in futures contracts.

d. forward contracts are mainly used for speculative purpose while futures contracts are mainly used for hedging purpose

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Answer #1

c. delivery of the underlying asset is usually made in forward contracts and delivery of the underlying asset is seldom made in futures contracts.

The price of a forward contract are set in advance for an asset that will be delivered in future. For example, the a buyer of forward contract for wheet will take deliver of wheet at a future date for a price set today. The delivery of asset is usually made. These are tailor made cotracts traded over-the-counter markets.

Delivery of asset does not usually take place. These are standardized contracts traded on exchanges. Ther are used for speculative purpose.

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