A Forward Contract Is Struck at a Forward Price of $40

question 8

Multiple Choice

A forward contract is struck at a forward price of $40. At maturity the spot price of the asset is $45. The short forward position earns the following payoff:

• A) $5
• B) -$5
• C) $45
• D) -$45

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Definitions:

Schema

Cognitive frameworks or concepts that help individuals organize and interpret information, influencing perception and understanding.

Episodic Memory

The type of long-term memory that involves the recollection of specific events, situations, and experiences.

Long-Term Memory

Long-Term Memory is a type of memory storage capable of holding information for extended periods, from days to decades, and includes both declarative and procedural memories.

Mnemonic Technique

A memory-enhancing strategy that involves associating new information with well-known items, phrases, or images to facilitate recall.