A farmer agrees to sell his produce of wheat to a Miller, 6 months later when his crop is ready, he sells his…

Question

A farmer agrees to sell his produce of wheat to a Miller, 6 months later when his crop is ready, he sells his wheat produce at a price that is agreed upon today by both the parties. Identify the type of contract.

Accepted Answer

## Model Answer This is a **Forward Contract** — a customized contract between two parties (farmer and miller) to sell wheat at a price agreed today, with settlement at a future date. ## Explanation The key features here are: customized agreement, two specific parties, future settlement, and price fixed today — all defining characteristics of a **forward contract**. It is not a futures contract because futures are standardized and exchange-traded, which is not the case here.

Financial Market Management — CBSE Class 10 board question