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7
Which of the following is true about a long forward contract
A.The contract becomes more valuable as the price of the asset declines
B.The contract becomes more valuable as the price of the asset rises
C.The contract is worth zero if the price of the asset declines after the contract has been entered into
D.The contract is worth zero if the price of the asset rises after the contract has been entered into
A.The contract becomes more valuable as the price of the asset declines
B.The contract becomes more valuable as the price of the asset rises
C.The contract is worth zero if the price of the asset declines after the contract has been entered into
D.The contract is worth zero if the price of the asset rises after the contract has been entered into
Answer: B
A long forward contract is an agreement to buy the asset at a predetermined price. The contract becomes more attractive as the market price of the asset rises. The contract is only worth zero when the predetermined price in the forward contract equals the current forward price (as it usually does at the beginning of the contract).
A long forward contract is an agreement to buy the asset at a predetermined price. The contract becomes more attractive as the market price of the asset rises. The contract is only worth zero when the predetermined price in the forward contract equals the current forward price (as it usually does at the beginning of the contract).
mayaaiko00@gmail.com (06.04.2024)
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zetisonu@gmail.com (21.02.2024)
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jeffreestar (12.01.2024)
Yes, you are correct. The correct answer is B. A long-term contract becomes more valuable as the price of the underlying asset rises because the buyer has locked in a lower price, and as the market price increases, the contract allows them to buy the asset at a lower cost than the current market price http://slicemastergame.com/
victorpatrick (08.01.2024)
I solved the problem after some time, and my response is the same as yours. http://buildnowgg.io
maruusa (03.01.2024)
After a while of solving the problem, my answer also matches the answer you gave. http://fnfgo.io
Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015