CFA Practice Question

CFA Practice Question

The price on a forward contract:
A. equals the forward price at contract initiation.
B. equals the forward price prevailing at maturity.
C. is determined at the expiration of the contract.
Explanation: A forward contract (and its exchange version, the "futures" contract) is a binding agreement that allows you to buy a particular asset at a specified price at the maturity of the contract. This price is set at the initiation of the contract and equals the forward price prevailing in the market. At maturity, the contract is settled, either in cash or through the delivery of the underlying.

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