- CFA Exams
- CFA Exam: Level I 2021
- Study Session 16. Derivatives
- Reading 49. Basics of Derivative Pricing and Valuation
- Subject 2. The Concept of Pricing vs. Valuation
CFA Practice Question
Today you entered a short six-month forward contract to sell a stock at a price of $32 six months from now. The stock is priced at $30 today. The risk-free interest rate is 3%, compounded annually. The value of your forward contract today is ______.
B. $0.5
C. $2
A. zero
B. $0.5
C. $2
Correct Answer: A
At initiation date the value of a forward contract is zero. The price of the forward contract is $32.
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