- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 51. Arbitrage, Replication, and the Cost of Carry in Pricing Derivatives
- Subject 2. Costs and Benefits Associated with Owning the Underlying
CFA Practice Question
Today you entered a short six-month forward contract to sell a stock at a price of $32 six months from now. The stock is priced at $30 today. The risk-free interest rate is 3%, compounded annually. The value of your forward contract today is ______.
B. $0.5
C. $2
A. zero
B. $0.5
C. $2
Correct Answer: A
At initiation date the value of a forward contract is zero. The price of the forward contract is $32.
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