During its life, the value of a forward contract is most likely equal to the price of the underlying minus the price of the:
A: forward.
B: forward, discounted over the original term of the contract.
C: forward, discounted over the remaining term of the contract.
A: forward.
B: forward, discounted over the original term of the contract.
C: forward, discounted over the remaining term of the contract.
举一反三
- The price of a forward contract most likely: A: decreases as the price of the underlying goes up. B: is constant and set as part of the contract specifications. C: increases as market risk increases.
- 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.
- A forward contract that must be settled by a sale of an asset by one party to the other party is termed a : A: physicals-only contract. B: deliverable forward contract. C: take-and-pay contract.
- Which of the following statements regarding early termination of a forward contract is most accurate A: A party who enters into an offsetting contract to terminate has no risk. B: A party who terminates a forward contract early must make a cash payment. C: Early termination through an offsetting transaction with the original counterparty eliminates default risk.
- A forward contract can be used to lock in the ____ of a specified currency for a future point in time. A: purchase price B: sale price C: A or B D: none of the above