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24 October, 02:10

The Country Farm and the Cookie Maker met today and agreed to exchange wheat six months from now at a price which they negotiated today. This agreement was made between the two firms and did not pass through an organized exchange. Which one of the following best describes this transaction?

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  1. 24 October, 03:15
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    Forward contract

    Explanation:

    forward contract is a non-standardized contract between two individuals (the buyer and seller) who agree to buy and sell a good on a future date at a specific price. Unlike the future contract, forward contract is not standardized and parties can easily breach agreements made because it is traded over the counter thus the risk is high.
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