What information is needed to determine the fair value of a foreign currency forward contract?
A) The forward rate at the date the contract was entered
B) The current forward rate for a contract that matures on the same dates as the forward contract that was entered into
C) A discount rate to determine the present value of the contract
D) All of the above information is needed

Question

Quizplus · Accepted Answer

To determine the fair value of a foreign currency forward contract, all of the above information is needed. The forward rate at the date the contract was entered is needed to calculate the difference between the contracted rate and the current rate. The current forward rate for a contract that matures on the same dates as the forward contract that was entered into is needed as a benchmark to determine if the forward contract rate is above or below market rates. A discount rate is needed to determine the present value of the contract, as future cash flows must be discounted to their present value to determine their fair value.

What Information Is Needed to Determine the Fair Value of a Foreign