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CFA Level 1
Derivatives

Forward Contract Value at Expiry

Very Easy Derivative Pricing And Valuation Forward Contracts

Consider the following scenario involving a forward contract:

Company ABC has entered into a forward contract to buy a commodity at a price of $50 per unit, with delivery scheduled in one year. The current market price of the commodity is $48 per unit.

What will be the value of the forward contract to Company ABC at expiry, assuming the market price of the commodity at that time is $55 per unit?

Hint

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