- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 46. Basics of Derivative Pricing and Valuation
- Subject 3. Pricing and Valuation of Forward Contracts
CFA Practice Question
Which compounding approach will yield a higher forward price, given the same quoted interest rate, delivery period and spot price, and no carrying benefits and costs?
A. Annual compounding
B. Continuous compounding
C. They will yield the same forward price.
Explanation: The forward price is simply the spot price compounded at the interest rate. Continuous compounding will yield the higher price.
User Contributed Comments 0
You need to log in first to add your comment.