All of the Following Data Points Are Needed to Determine

question 85

Multiple Choice

All of the following data points are needed to determine the fair value of a forward contract (at any point) , except

• A) The forward rate when the forward contract was entered into.
• B) The current forward rate for a contract that matures on the same date as the forward contract entered into.
• C) The forward rate for a contract that has the same duration as the forward contract entered into.
• D) A discount rate which is typically the company's incremental borrowing rate.
• E) A future rate which is typically the company's incremental borrowing rate.

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Definitions:

Treasury Debt

Government-issued bonds to finance government spending, considered low-risk investments.

Mortgage-Backed

Mortgage-backed refers to securities that are secured or backed by mortgage loans, allowing investors to receive payments derived from the principal and interest payments made by borrowers.

Money Market

The section of the financial market dealing with the lending and borrowing of short-term funds, including treasury bills, commercial paper, and certificates of deposit.

Repurchase Agreements

Short-term loans where a borrower sells securities to a lender with an agreement to buy them back at a higher price at a future date.