You enter into a forward contract to take delivery of one million Deutsche marks three months from now.What happens to the price you will pay at expiration if marks depreciate during the contract?
A)Your price will increase
B)Your price will decrease
C)Your price was fixed at the onset of the contract
D)Your price was fixed, and you will receive correspondingly more marks due to the depreciation

Question

Quizplus · Accepted Answer

The price in a forward contract is fixed at the onset of the contract, meaning changes in the currency value during the contract term do not affect the agreed-upon price.

You Enter into a Forward Contract to Take Delivery of One