Question: Question 4. (10 Marks) a. Explain the difference between a future and a forward contract and the circumstances in which a forward contract may be

Question 4. (10 Marks) a. Explain the difference between a future and a forward contract and the circumstances in which a forward contract may be preferred to a futures contract. b. Discuss three advantages of futures contracts. c. During the life of the futures contract, there will be a difference between the spot and futures prices. This difference is known as the basis and is defined as: Basis = Spot price Futures price Discuss two reasons why the basis exists?

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