Financial crises A: are major disruptions in financial markets that are characterized by sharp declines in asset prices and the failures of many financial and nonfinancial firms B: occur when adverse selection and moral hazard problems in financial markets become more significant C: frequently lead to sharp contractions in economic activity D: are all of the above

There are two forward contracts, contract 1 and contract 2, on the same underlying. The underlying makes no cash payments, does not yield any nonfinancial benefits, and does not incur any storage costs. Contract 1 expires in one year, and contract 2 expires in two years. It is most likely that the price of contract 1: A: is equal to the price of contract 2. B: is less than the price of contract 2. C: exceeds the price of contract 2.