question archive A book publisher requires substantial quantities of paper
Subject:FinancePrice:2.86 Bought7
A book publisher requires substantial quantities of paper. The publisher and a paper producer have entered into an agreement for the publisher to buy and the producer to supply a given quantity of paper four months later at a pnce agreed upon today. This agreement is a Commodity swap Futures contract Forward contract
Answer is forward contract.
because in forward contract both the buyer and seller agree to buy and sell a certain amount of quantity at the pre-determined price.
because future contracts are generally entered with stock exchange involvement and the quantity cannot be tailored as per the requirement. the contract size is predetermined in future contracts.
In commodity SWAP one commodity is exchanged with another commodity between buyer and seller