{"id":33011,"date":"2024-04-15T09:10:12","date_gmt":"2024-04-15T09:10:12","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=33011"},"modified":"2024-04-15T09:10:12","modified_gmt":"2024-04-15T09:10:12","slug":"suppose-party-a-has-a-right-to-buy-usd-6000-from-party-b-1-month-down-the-line-at-rs-46-1-usd-us-dollar-however-after-1-month-party-a-does-not-exercise-the-right-this-is-possible-in-which-co","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/suppose-party-a-has-a-right-to-buy-usd-6000-from-party-b-1-month-down-the-line-at-rs-46-1-usd-us-dollar-however-after-1-month-party-a-does-not-exercise-the-right-this-is-possible-in-which-co\/","title":{"rendered":"Suppose Party A has a right to buy USD 6,000 from Party B, 1 month down the line, at Rs. 46 = 1 USD (US Dollar).However, after 1 month Party A does not exercise the right. This is possible in which contract?"},"content":{"rendered":"<p>[amp_mcq option1=&#8221;Swap&#8221; option2=&#8221;Futures&#8221; option3=&#8221;Forward&#8221; option4=&#8221;Options&#8221; correct=&#8221;option4&#8243;]<!--more--><\/p>\n<p>The correct answer is D. Options.<\/p>\n<p>A swap is an agreement between two parties to exchange cash flows in the future based on a predetermined formula. A futures contract is an agreement to buy or sell a specified asset at a specified price on a specified date in the future. A forward contract is similar to a futures contract, but it is not traded on an exchange. An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an asset at a specified price on or before a specified date.<\/p>\n<p>In the given example, Party A has a right to buy USD 6,000 from Party B, 1 month down the line, at Rs. 46 = 1 USD. This is an option contract. Party A has the right, but not the obligation, to buy USD 6,000 from Party B at Rs. 46 = 1 USD. If Party A does not exercise the option, then Party A does not have to buy USD 6,000 from Party B.<\/p>\n<p>A swap, futures contract, and forward contract are all binding agreements. If Party A enters into a swap, futures contract, or forward contract, then Party A is obligated to fulfill the terms of the contract. In the given example, if Party A enters into a futures contract to buy USD 6,000 from Party B, then Party A is obligated to buy USD 6,000 from Party B, even if the price of USD falls below Rs. 46 = 1 USD.<\/p>\n<p>Therefore, the only contract that allows Party A to not exercise the right is an option contract.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>[amp_mcq option1=&#8221;Swap&#8221; option2=&#8221;Futures&#8221; option3=&#8221;Forward&#8221; option4=&#8221;Options&#8221; correct=&#8221;option4&#8243;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[699],"tags":[],"class_list":["post-33011","post","type-post","status-publish","format-standard","hentry","category-banking-and-financial-institutions","no-featured-image-padding"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Suppose Party A has a right to buy USD 6,000 from Party B, 1 month down the line, at Rs. 46 = 1 USD (US Dollar).However, after 1 month Party A does not exercise the right. This is possible in which contract?<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/suppose-party-a-has-a-right-to-buy-usd-6000-from-party-b-1-month-down-the-line-at-rs-46-1-usd-us-dollar-however-after-1-month-party-a-does-not-exercise-the-right-this-is-possible-in-which-co\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Suppose Party A has a right to buy USD 6,000 from Party B, 1 month down the line, at Rs. 46 = 1 USD (US Dollar).However, after 1 month Party A does not exercise the right. 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