6.At expiration, the value of a forward contract is: A) the difference between the contract price and the market value of the underlying asset. B) always greater than or equal to zero. C) equal to the market price of the underlying asset. D) the difference between the buy price for the long and the sell price for the short. The correct answer was A) In a forward contract, the long is obligated to buy, and the short is obligated to sell, the underlying asset at the contract price. The difference between the contract price and the market price of the asset is what gives the contract value. The contract has a positive value at expiration to the long/short only if the contract price is below/above the market price. 7.The price of a forward contract: A) changes over the term of the contract. B) must be expressed in the relevant currency units. C) is determined at contract initiation. D) depends on forward interest rates. The correct answer was C) The price of a forward contract is established at the initiation of the contract and is expressed in different terms, depending on the underlying assets. It is the price that makes the contract value zero, and depends on current interest rates through the cost-of-carry calculation. 8.Which of the following best describes the price of a forward contract? The forward price is: A) always expressed in dollars. B) the amount it costs to purchase the forward contract. C) the price that makes the values of the long and short positions zero at contract initiation. D) always equal to the market price at contract termination. The correct answer was C) The forward price is the contract price of the underlying asset under the terms of the forward contract, and is the price that makes the values of the long and short positions zero at contract initiation. It is not the amount it costs to purchase the forward contract. The forward price is expressed in terms of the underlying asset, and may be a dollar value, exchange rate, or interest rate. The value of a forward contract comes from the difference between the forward contract price and the market price for the underlying asset. These values are likely to be different at contract termination, which will result in a profit for either the long or the short position. 9.The theoretical price of a forward contract: A) equals the long’s expectation of the future price of the underlying asset. B) includes accrued interest on a bond forward contract. C) is the no-arbitrage price. D) is always greater than the current price of the underlying asset. The correct answer was C) The theoretical price of a forward contract is the future price of the underlying asset imposed by the no-arbitrage conditions. It can be less than the current price of the asset if the cost-of-carry is negative. Accrued interest is paid by the long at delivery under a bond forward, but is not included in the price quote, which is usually in terms of yield to maturity at the settlement date. 10．The price of a forward contract: A) is the settlement price for the underlying asset. B) must be equal to the market price at contract termination. C) is equal to the value of the contract in equilibrium. D) is different for the long and the short. The correct answer was A) The price of a forward contract is the price of the underlying asset that the long will pay to the short at settlement (for a deliverable contract). The value of a forward contract comes from the difference between the forward contract price and the market price for the underlying asset. This difference between price and value is a key concept to understand. A forward contract has only one price, which applies to both the long and to the short. | 
发表于 2008-4-14 15:20
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