alleryStart learning →Alice owns a 100,000 house; the risk-free rate is 4% a year. Minimum one-year forward price?
A108,000
B100,000
C96,000
D104,000
Answer & Solution
Correct answer: D. 104,000
Selling now and banking the proceeds gives 100,000 x 1.04 = 104,000, so she needs at least that amount to wait.
Keep practising Futures Contract
Browse all Futures Contract questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
Futures contracts are highly standardized whereas forwards:Between two parties, which risk is higher in a forward than in a futures contract?Exchange limits on position size tighten close to expiry mainly to:A mutual fund tracking the S&P 500 invests inflows quickly in stock index futures. This prBuying spot and selling forward when the forward exceeds its fair value earns:Which is a standard use of forward contracts according to finance theory?Foreign exchange forwards are usually quoted as the difference from spot in:In a currency forward, the agreed currency amounts that are specified in the contract are