CFA Practice Question

There are 253 practice questions for this study session.

CFA Practice Question

Which statement is true regarding the forward points?

A. Forward points need to be annualized.
B. Forward points are commonly quoted in fractions of 1/100.
C. The longer the term of the forward contract, the larger the absolute number of forward points.
Correct Answer: C

A. They are already annualized.

B. They are commonly quoted in fractions of 1/10,000. +20 points would mean add 0.002 to the spot rate. As an example, if an investor wished to purchase Australian dollars (AUD) using a forward currency contract, and was quoted AUD at 0.9000 minus 55.55 points, the forward rate would be 0.894445.

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