One Can Describe a Forward Contract as Agreeing Today to Buy

question 62

Multiple Choice

One can describe a forward contract as agreeing today to buy a product

• A)at a later date at a price to be set in the future.
• B)today at its current price.
• C)at a later date at a price set today.
• D)if and only if its price rises above its exercise price.

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Definitions:

Repurchase

The action of a company buying back its own shares from the marketplace, reducing the amount of outstanding stock.

Initial Investment

The original sum of money or capital used to purchase assets or start an investment portfolio at the outset.

Short 150 Shares

The action of borrowing 150 shares of a stock with the aim of selling them in the hope that the stock price will decline, allowing for profit upon repurchasing the shares at a lower price.

Initial Margin

The portion of the purchase price that an investor must deposit when buying securities on margin, serving as a form of collateral.