Suppose You Buy a One-Year Forward Contract at $65

question 59

Multiple Choice

Suppose you buy a one-year forward contract at $65.At expiration,the spot price is $73.The risk-free rate is 10 percent.What is the value of the contract at expiration?

• A)$8.00
• B)-$8.00
• C)$0.00
• D)$7.27
• E)none of the above

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Definitions:

Negative Reinforcement

A psychological concept where the removal of an unfavorable event or outcome after the display of a behavior increases the likelihood of that behavior being repeated in the future.

Thorndike's Law Of Effect

A psychological principle stating that behaviors followed by satisfying consequences are more likely to be repeated, while those followed by unpleasant consequences are less likely to be repeated.

Skinner's Theory

A theory developed by B.F. Skinner that emphasizes operant conditioning, where behavior is shaped and maintained by its consequences, including reinforcements and punishments.

Pavlov's Theory

A theory posited by Ivan Pavlov that emphasizes the role of conditioned reflexes in the occurrence of certain behaviors through classical conditioning.