Certified Management Accountant Practice Exam 2025 - Free CMA Practice Questions and Study Guide

In a futures contract, the price and quantity to be traded are typically predetermined. This is a fundamental characteristic of futures contracts, allowing parties to establish the terms of the transaction in advance. By agreeing on a specific price and the quantity of the underlying asset at the onset, both parties can hedge against price fluctuations, which is one of the primary purposes of futures contracts.

Additionally, the predetermined price locks in costs for buyers and sellers, facilitating more accurate financial planning and risk management. This level of certainty is crucial for participants in the commodities, financial instruments, and various markets that utilize futures for trading and hedging.

Other aspects, such as the fees charged for trading or the identity of the counterparty, can vary widely and are not inherently predetermined within the contract itself. The length of the contract duration is defined in terms of a maturity date but does not have the same emphasis on a predetermined price or quantity directly related to the executed trade.