A bakery generally enters into a forward contract in wheat as a:

A bakery generally enters into a forward contract in wheat as a:    A.  hedger. B.  speculator. C.  spot trader. D.  broker. E.  spectator. Refer to section 23.3

21.

A forward contract:    A.  requires that payment be made in full when the contract is originated. B.  provides the buyer with an option to buy an asset on the settlement date at the forward price. C.  is a binding agreement on both the buyer and the seller and nets out as a zero sum game. D.  is marked to the market daily at the seller's request. E.  allows for immediate delivery at an agreed upon price which is to be paid on the settlement date. Refer to section 23.3

22.

Which one of the following is true regarding forward contracts?    A.  The upfront costs to enter a forward contract can be significant. B.  If a buyer of a forward contract earns a $200 profit then the seller will also profit by $200. C.  The buyer wins when market prices are less than the forward price. D.  The payoff profile for the buyer of a forward contract is an upward sloping linear function. E.  If the seller of a forward contract earns a profit then the buyer has neither a profit nor a loss. Refer to section 23.3

23.	A payoff profile:    A.  determines the price of an option contract. B.  determines whether a forward or a futures contract is needed. C.  applies only to contract sellers. D.  determines the price of a collar. E.  illustrates potential gains and losses. Refer to section 23.3

24.

Futures contracts:    A.  are identical to forward contracts except for the size of the contract. B.  provides an option to purchase an asset at a specified price on the settlement date. C.  are marked to the market on a daily basis. D.  cannot be resold. E.  are limited to contracts on financial assets. Refer to section 23.4