Short Problems 1.Describe the main features of forwards contracts.How do forwards contracts differ from futures contracts? Answer: Main features offorwards contracts: ● Two parties agree to exchange some item in the future at a price specified now-this specified price is called the forward price. The spot price is the price for immediate delivery of the item. No money is paid in the present by either party to the other. The face value of the contract is the quantity of the item specified in the contract multiplied by the forward price. The party who commits to buy the specified item is said to take a long position and the party who commits to sell the item is said to take a short position. A futures contract is essentially a standardized forward contract that is traded on an organized exchange.The exchange interposes itself between the buyer and the seller,so that each has a separate contract with the exchange.Standardization means that the terms of the futures contract are the same for all contracts. 11-1011-10 Short Problems 1. Describe the main features of forwards contracts. How do forwards contracts differ from futures contracts? Answer: Main features of forwards contracts:  Two parties agree to exchange some item in the future at a price specified now – this specified price is called the forward price.  The spot price is the price for immediate delivery of the item.  No money is paid in the present by either party to the other.  The face value of the contract is the quantity of the item specified in the contract multiplied by the forward price.  The party who commits to buy the specified item is said to take a long position and the party who commits to sell the item is said to take a short position. A futures contract is essentially a standardized forward contract that is traded on an organized exchange. The exchange interposes itself between the buyer and the seller, so that each has a separate contract with the exchange. Standardization means that the terms of the futures contract are the same for all contracts