CFA Practice Question

There are 227 practice questions for this study session.

CFA Practice Question

Three months ago, an investor entered into a six-month forward contract to sell a stock. The delivery price agreed to was $55. Today, the stock is trading at $45. Suppose the three-month interest rate is 4.80% in continuously compounded terms. Assuming the stock is not expected to pay any dividends over the next three months, what is the value of the contract held by the investor?
A. 56.3360
B. 9.3439
C. 45.5433
Explanation: The value of the contract is PV (K -?? F). Since K -?? F = 55.000 -?? 45.5433 = 9.4567, the contract value is 9.4567 * e(-??0.048 * 3/12) = 9.3439.

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