Financial accounting A forward contract's fair value at inception istypically:a) Equal to the notional amountb) nonec) Equal to the premium paidd) The present value of future cash flowse) Zero

Explanation of Forward Contract: A forward contract is a customized agreement between two parties to…

Answered: A forward contract's fair value at…

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 4Q

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The contract value of a GIC is __________; the fair value of a GIC is __________. Select one: a. the present value of future cash flows; the future value of future cash flows b. its cost; the present value of future cash flows c. the future value of future cash flows; the present value of future cash flows d. its cost; the future value of future cash flows
Which of the following is true about forward contract expiration? a.A deliverable forward contract stipulates that the short will pay the agreed-upon price to the long, who in turn will deliver the underlying asset to the short. b.Under cash settlement, it permits the short to pay the net cash value of the position on the delivery date. c.Under cash settlement, it permits the long to pay the net cash value of the position on the delivery date. d.Under cash settlement, it permits the long and short to pay the net cash value of the position on the delivery date.
The forward contract value today is denoted as a.Vo(0,T) b.Fo(0,T) c.So(1 + r)^T d.Fo(0,T)/(1 + r)^(T – t)
_____ is a contract that involves compensation for specific potential future losses in exchange for periodic payments and that provides for the transfer of the risk of a loss, from one entity to another, in exchange for a premium. a.Spot contract b.Insurance c.Hedging d. Forward contract
Assuming the forward contract entered in at the price of $285 and the price of the underlying asset instead is $298.32 at expiration. The market value and the overall position of the forward contract from our perspective would be: a. $13.32 b. -$13.32 c. $28.47 d. -$28.47
An agreement between two parties to exchange a series of specified periodic cash flows in the future based on some underlying instrument or price is a(n): a. forward agreement. b. futures contract. c. interest rate collar. d. option contract. e. swap contract. Clear my choice
2. Which of the following may not be equal to the contract rate of interest? a. stated rateb. nominal ratec. face rated. effective rate
In an interest swap contract, the exchange of cash flow calculated in each period is based upon the: a. notional principal. b. present value of notional principal. c. swap principal. d. face value of interest-bearing bond.
on the date of expiry, the price of an expiring forward or future contract must be equal to the spot price. do you agree? why?
A swap contract Select one: A. relates to the trading of an asset owned by one company for another owned by a second company. B. is an arrangement between two or more parties to exchange future cash flows. C. can be used to increase or decrease the ratio of fixed and variable interest costs in its cost structure. D. Both B and C are true.
Assuming the contract entered into at the price you computed is $365.42 and the underlying asset is $395.68 at expiration. The market value and the overall position of the forward contract on the perspective of the investor would be: a. -$30.26 b. -$38.05 c. $30.26 d. $38.05
An agreement between two parties to exchange a series of specified periodic cash flows in the future based on some underlying instrument or prices r O option contract. Oswap contract O futures contract. Actvate Windows forward agreement.

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A forward contract's fair value at inception is typically: a) Equal to the notional amount b) none c) Equal to the premium paid d) The present value of future cash flows e) Zero