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Choose a statement that correctly describes the difference between the price of a forward contract and the value of a forward contract: The price is
Choose a statement that correctly describes the difference between the price of a forward contract and the value of a forward contract:
The price is what the investor pays. The value is what the seller of the forward contract gets (short forward position)
The price of a forward contract is determined at contract initiation, and the value is always zero in the beginning and later it changes. The transaction can result in a loss.
The value is calculated as follows: value = Sales price - purchase price - premium paid
The value is a clear indicator whether an investment in the underlying is recommendable.
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