You Enter into a Forward Contract to Take Delivery of 1

question 86

Multiple Choice

You enter into a forward contract to take delivery of 1 million euros 3 months from now.What happens to the price you will pay at expiration if the euro depreciates during the contract period?

• A) Your price will increase.
• B) Your price will decrease.
• C) Your price was fixed at the onset of the contract.
• D) Your price was fixed but you will receive correspondingly more euros due to the depreciation.

---

Definitions:

Assumptions

Statements or ideas accepted as true without proof, used as the basis for reasoning or argumentation.

Explanandum

The phenomenon or event that is to be explained, often used in the context of scientific inquiry.

Hypothesis

A proposed explanation for a phenomenon, often based on limited evidence as a starting point for further investigation.

Plausible

Appearing likely or probable, often based on circumstantial evidence or logical reasoning, but not confirmed.