A graph depicting the gains and losses a seller of a forward contract would earn at various market prices is referred to as a:
A)risk profile.
B)payoff profile.
C)risk offer line.
D)scatter plot.
E)risk-return graph.

Question

Quizplus · Accepted Answer

A payoff profile is a graph that shows the gains and losses that a seller of a forward contract would earn at various market prices. It is a useful tool for understanding the potential outcomes of a forward contract and assessing the risk-reward trade-off associated with it. The other options listed are not commonly used terms in finance and do not describe a graph that depicts the gains and losses of a forward contract seller.

A Graph Depicting the Gains and Losses a Seller of a Forward