You enter into a forward contract to take delivery of 1 million euros 3 months from now.What happens to the price you will pay at expiration if the euro depreciates during the contract period?
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 but you will receive correspondingly more euros due to the depreciation.

Question

Quizplus · Accepted Answer

In a forward contract, the price is fixed at the onset of the contract, so it does not change regardless of currency fluctuations.

You Enter into a Forward Contract to Take Delivery of 1