Kaplans' Derivatives Question - seems wrong
Hi All, Could some of you look at these question from quiz 57.1. To me the answers seem wrong.
1. Derivatives pricing models use the risk-free rate to discount future cash flows
because these models:
A. are based on portfolios with certain payoffs.
B. assume that derivatives investors are risk-neutral.
C. assume that risk can be eliminated by diversification.
2. The price of a forward or futures contract:
A. is typically zero at initiation.
B. is equal to the spot price at expiration.
C. remains the same over the term of the contract
3. For a forward contract on an asset that has no costs or benefits from holding it to
have zero value at initiation, the arbitrage-free forward price must equal:
A. the expected future spot price.
B. the future value of the current spot price.
C. the present value of the expected future spot price.
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