Suppose You Bought a Forward on January 1 That Matures

question 12

Multiple Choice

Suppose you bought a forward on January 1 that matures a year later.The forward price was $214 at that time and the simple interest rate was 7 percent per year.Six months have passed,and the spot price is now $190.The value of your forward contract today is:

• A) -$16.76
• B) -$3.56
• C) 0
• D) $16.76
• E) None of these answers are correct.

---

Definitions:

Put Option Contracts

Financial contracts allowing the holder to sell an asset at a specified price within a fixed time period.

Lbs

An abbreviation for pounds, a unit of weight commonly used in the United States and the British imperial system; not directly a financial term unless related to commodities trading.

Coffee Futures

Financial contracts obligating the buyer to purchase coffee, and the seller to sell coffee, at a predetermined future date and price.

Pounds

A unit of mass commonly used in the British imperial and United States customary systems, equivalent to 0.453592 kilograms.