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FIN 413 (LEC B01 B02 B03 Winter 2025) Quiz 3

Single choice

Which of the following statements is FALSE?

Options
A.a. On the date a forward contract is signed, the forward price is determined so that the contract value is zero
B.cross out
C.b. Once a forward contract has been signed, its value does not depend on the price of the underlying asset
D.cross out
E.c. After a forward contract has been signed, its value depends on the forward price for a new forward contract with the same maturity date and the same underlying asset
F.cross out
G.d. After the signature date of a forward contract, the value of the contract for a short position is equal to the negative of the value for a long position.
H.cross out
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Step-by-Step Analysis
Question restatement: Which of the following statements is FALSE? Option a: 'On the date a forward contract is signed, the forward price is determined so that the contract value is zero.' This is true by construction. When a forward contract is initiated, the forward price is set so that neither party has a gain or loss at inception, meaning the contract’s value is zero at t=0. Optio......Login to view full explanation

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