New Click Here to Play Diwali Spin and Win and Get Huge Discounts

    Register

    Question

    The price of a forward or futures contract:

    A Is zero at the initiation of a contract Correct Answer Incorrect Answer
    B Is equal to spot price at expiration Correct Answer Incorrect Answer
    C Remain same throughout the contract period Correct Answer Incorrect Answer
    D Differs from each other Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

        The price of the forward or futures contract is the price specified to be paid for the underlying asset at a future date. The value of both contracts is nil (zero) at the initiation of the contract [AA1]   [AA2]   [AA3]   . At the initiation of the forward contract, no money is exchanged, and the contract at initiation is valueless. Like forward contracts, the futures price is established so that the initial value of a futures contract is zero . The value at maturity (expiration) is the difference between the spot price and the contract price.  [AA1] Is this something like for option we pay a premium but for futures or forwards there is no such cost associated??  [AA2] The value of both contracts is zero at the initiation. Nothing changes hands added  [AA3]

    Practice Next