An Investor Enters into a Forward Contract to Purchase 100,000 $+ \$ 198,600.00$

question 9

Multiple Choice

An investor enters into a forward contract to purchase 100,000 shares of IBM stock in 2 months at prices of $105 per share.After one month,the investor notes that the forward price for the same contract (which now has a one-month maturity) is $103 per share.She also notes that the one-month discount factor is 0.993.The value of the forward contract held by the investor is

• A) \(+ \$ 198,600.00\)
• B) \(- \$ 198,600.00\)
• C) \(+ \$ 200,000.00\)
• D) \(+ \$ 201,409.90\)

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Definitions:

Vertical Analysis

A method of financial statement analysis in which each line item is listed as a percentage of a base figure within the statement.

Segment Data

Information regarding the different operating segments of a company as required by accounting standards to help investors better understand the company's performance.

Fiscal Years

A one-year period that companies and governments use for financial reporting and budgeting, which may not necessarily align with the calendar year.

Cash Payments Journal

A financial journal that records all cash outflows or payments made by a company.