- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 28. The Term Structure and Interest Rate Dynamics
- Subject 2. Yield Curve Movement, Forward Curve and Rolling Down the Yield Curve
CFA Practice Question
If you expect the future spot rate to be higher than the current forward rate, the forward contract value is expected to:
A. increase.
B. decrease.
C. remain the same.
Explanation: The market is expected to discount the forward contract using a lower rate, causing the forward contract to be overvalued.
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