Question: 16. Explain why forward contracts are used primarily for hedging, whereas futures contracts are used primarily for speculation. short answer question

16. Explain why forward contracts are used primarily for hedging, whereas futures contracts are used primarily for speculation.

short answer question

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

The premium for September 19th call option on Canadian dollar is $0.04, and the strike price is $0.80. Assume that on September 19 the spot rate for the Canadian dollar rose to $0.92. What is the USD...

Q:

What factors should be considered in deciding whether the cost of capital for a foreign affiliateshould be higher, lower, or the same as the cost of capital for a comparable domestic operation?...

Q:

Evaluate the potential gains and losses for forwards,future,call options,put options and swaps. Outline and describe the different risks that each type of derivative contract faces. Describe...

Q:

Financial Engineering ASSIGNMENT A QI. A swap bank has to entail certain risks which are inherent to the swap business and are interrelated Explain the risks involves in swap business. Q2. Call...

Q:

I need a step by step solutions for the 10 problems in the excel file. The correct answers are provided I only need the solutions steps. Subject is Finance (options valuation) On March 2, a Treasury...

Q:

It's a case study of GM ( read corp 2.docx). Want to know the answer of Q1, Q2, Q3, Q4 ( from corp.docx) General Motors Stephane Bello, an analyst in the Capital Markets group at General Motors (GM),...

Q:

Case study (a) The following options are quoted at the market: Option Expiration Strike Price Premium Call 1 Month Rs.48.5/$ Rs.0.30 Put 1Month Rs.48.5/$ Rs.0.05 A trader is looking at the above...

Q:

STARK SUPPLY CO. (A) Daniel Marks, the chief financial officer of Stark Supply Co, has met with James Grom, vice president of the International Division of First Mississippi Bank on the morning of...

Q:

THIS QUESTION IS DUE IN EXACTLY 1 HOUR AND 45 MINUTES. I WILL PAY EXTRA 10 DOLLARS IN TIP IF SOMEONE TYPES THE EXACT ANSWER REQUESTED. PLEASE RESPOND TO THE EACH AND EVERY QUESTION IN A TOTAL OF 3-4...

Q:

STARK SUPPLY CO. (A) Daniel Marks, the chief financial officer of Stark Supply Co, has met with James Grom, vice president of the International Division of First Mississippi Bank on the morning of...

Q:

A Swiss firm, Smythe and Yves ( S& Y), manufactures toiletries such as hand soaps, shampoo, conditioners, and a mouthwash that hotels purchase and place in the rooms for their guests. S& Y uses a...

Q:

Calculate the standard enthalpy of formation (H f) for nitroglycerin. The explosive nitroglycerin (C3H5N3O9) decomposes rapidly upon ignition or sudden impact according to the following balanced...

Q:

A new client is admitted with psychotic symptoms. After completing the primary psychotic symptoms observation, it is determined that the client is experiencing active psychotic symptoms. What is the...

Q:

Back in the day, Dale Carnegie and Zig Zigler was one the top trainers in the world on selling. What are sales people doing today to finetune their craft?

Q:

Go to a grocery store and notice how products are placed on shelves (at eye level, lower, or higher) and the colors and designs on product packaging. Identify factors discussed in this chapter that...

Q:

Both Jim and his parents make attributions to explain his grades. Describe the dimensions of Jims attributions and those of his parents.

Q:

Paul Watzlawick (1984). The invented reality: How do we know what we believe we know? Dont let the publication date of this book fool you. It is as useful today as when it was published in raising...