Seeing is believing!
Before you order, simply sign up for a free user account and in seconds you'll be experiencing the best in CFA exam preparation.
Basic Question 0 of 1
John has an asset that is worth $110. He plans to sell it in 8 months. The risk-free interest rate is 4.5%. Suppose the forward contract is entered into at $113.28. Four months later, the price of the asset is $105. What's the market value of the forward contract at this point in time from John's perspective?
User Contributed Comments 4
| User | Comment |
|---|---|
| vi2009 | Got to remember that T = # of months to expiration. therefore T - t = 8/12 - 4/12 = 4/12 |
| joywind | no, vl2009 T = term of the contract from initiation to close = 8 months t = time past = 4 months T-t = time to expiration = 4 months |
| forry9er | Stick to the principles of discounting! The answer should be 6.65. Divide (i) by the # of compounding periods, then multiply (N) by # of compounding periods. |
| Sagarsan88 | Agree forrey9e |
I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt
Learning Outcome Statements
compare the FCFE model and dividend discount models;
explain how dividends, share repurchases, share issues, and changes in leverage may affect future FCFF and FCFE;
evaluate the use of net income and EBITDA as proxies for cash flow in valuation;
CFA® 2025 Level II Curriculum, Volume 4, Module 22.