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:

Capital Gain

The profit from the sale of assets such as stocks, bonds, or real estate, which exceeds the purchase price.

Annual Dividend

The total dividend payment a shareholder receives from a company in one fiscal year, based on the number of shares owned.

Stock Yield

The annual percentage of return that is received from the dividend payments made by a stock, calculated as the annual dividends per share divided by the stock's current price.

4-day SMA

A short-term moving average that calculates the average of the last four days' prices or values in financial analysis.