CFA Practice Question

There are 227 practice questions for this study session.

CFA Practice Question

A portfolio manager took a long position on a 180-day forward contract on the S&P 500 stock index 30 days ago. At the time of the contract initiation:

  • The no-arbitrage forward price was $1263.87.
  • The index was at $
  • The constant continuously compounded dividend yield is 1.45%.
  • The constant discrete risk-free rate is 4.6%.

At expiration the index value is still $1245. What is the value of the forward contract at expiration?
A. $0
B. -$18.87
C. -$12.34
Explanation: ST = 1245
F0(T) = 1263.87
VT(0, T) = 1245 - 1263.87 = -$18.87
This is a loss to the long position.

User Contributed Comments 3

User Comment
ostrich An interesting question....to say the least!!
Xocrevilo Not hard: V (of long at expiration) = ST - F
broadex Simple: at expiration no dividend discounting nor interest rate discounts. its just FV of index less future value of forward. (not exactly future values at expiration since these are now spot prices)
You need to log in first to add your comment.