CFA Practice Question

There are 206 practice questions for this study session.

CFA Practice Question

Two parties agree to a forward contract to deliver the S&P 500 Index at a price of $375,000 in 2 months time. When the forward contract expires, the price of the S&P 500 Index is $350,000 but the long party is unable to pay the cash settlement. The short party is most likely obligated to ______.
A. default on the forward contract
B. do nothing until the long makes payment
C. accept delivery of S&P 500 stocks from the long
Explanation: Given a forward contract cash settlement, only the net payment is required. The long owes the short $25,000.

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