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Basic Question 4 of 11
Which of the following statements best characterizes forward stock markets like the London and Paris markets?
B. Settlement of transactions takes place infrequently, such as one day each month.
C. Even after a transaction has been consummated, the price is not determined until a specified date in the future.
D. Change in ownership of a stock takes place on the day of the transaction, although money is not exchanged until five business days later.
A. Investors buy and sell contracts for future delivery of shares, but the shares themselves do not change ownership.
B. Settlement of transactions takes place infrequently, such as one day each month.
C. Even after a transaction has been consummated, the price is not determined until a specified date in the future.
D. Change in ownership of a stock takes place on the day of the transaction, although money is not exchanged until five business days later.
User Contributed Comments 9
| User | Comment |
|---|---|
| anita | forward market .. unlike futures market wehre transactions takes place daily .. in forward market it takes place infrequently |
| 0is4eva | Exclude A, C and D as they are illogical in this context. Remaining: B. Reading 69: "Forward contract ... an agreement between two parties in which one party, the buyer, agrees to buy from the other party, the seller, an underlying asset at a future date at a price agreed upon at the start." "It is generally conceded, however, that London and New York are the primary markets for over-the-counter derivatives;" |
| Nikita | I am not seeing a response why the answer is B Ois4eva on what you posted .... can you clarify? |
| Rotigga | Use process of elimination. Everything except B doesn't make sense. |
| long2012 | Infrequently means not every day as future. So B is correct. |
| To-be-CFA | A: Ownership of shares is possible. B: Settlement happens at expiration, and not everyday. C: Price is pre-determined at the initiation of the contract. D: 5 days point has no relevance. |
| ankurwa10 | the term forward stock market confused me. It implies an organised exchange. but then, well I am nitpicking. |
| Rachelle3 | not everyday = infrequent makes sense to me! |
| yinlina | infrequently,oh yeah |
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Learning Outcome Statements
define forward contracts, futures contracts, swaps, options (calls and puts), and credit derivatives and compare their basic characteristics
CFA® 2024 Level I Curriculum, Volume 5, Module 2.