- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 4. Arbitrage, Replication, and the Cost of Carry in Pricing Derivatives
- Subject 2. Costs and Benefits Associated with Owning the Underlying
CFA Practice Question
What will be the most likely impact on the forward price of a stock if the company announces a dividend during the contract whose ex-dividend would fall after the expiration date of the contract?
B. Decrease in price
C. No impact
A. Increase in price
B. Decrease in price
C. No impact
Correct Answer: C
If the cash flows are not expected to occur during the contract, then those cash flows will have no impact on the forward price.
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