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In April, a farmer goes to the local co-op and puts together a contract agreeing to sell 10,000 bushels of corn at $6.50 a bushel on November 1. This type of an agreement is best described as a:
- Forward contract
- Futures contract
- Swap
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Up3
This is a forward
contract, an agreement between two parties to sell an asset at a certain
price at a certain time.Futures contracts are more standardized and bought and sold
on an exchange.Swaps are a series of forward contracts. While the case
could be made that a forward contract is just a single-series swap, the
description best describes forward
contracts.
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