Deal of The Day! Hurry Up, Grab the Special Discount - Save 25% - Ends In 00:00:00 Coupon code: SAVE25
Welcome to Pass4Success

- Free Preparation Discussions
Mail Us support@pass4success.com
Location US
Mob_nav_barsMENU

GARP 2016-FRR Exam - Topic 3 Question 7 Discussion

Which one of the following four relationships should be used to price equity forwards or futures?
C) Equity forward or futures price = market equity price x (1 + risk-free rate -- expected dividend rate)t
A) Equity forward or futures price = market equity price + (1 + risk-free rate -- expected dividend rate)t
B) Equity forward or futures price = market equity price x (1 - risk-free rate -- expected dividend rate)t
D) Equity forward or futures price = market equity price + (1 + risk-free rate + expected dividend rate)t

GARP 2016-FRR Exam - Topic 3 Question 7 Discussion

Actual exam question for GARP's 2016-FRR exam
Question #: 7
Topic #: 3
[All 2016-FRR Questions]

Which one of the following four relationships should be used to price equity forwards or futures?

Show Suggested Answer Hide Answer
Suggested Answer: C

by Aileen at Jun 15, 2025, 06:41 PM

Limited Time Offer

25%

Off

Get Premium 2016-FRR Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

0/2000 characters
Submit Cancel
Kizzy
7 months ago
I disagree, option D seems off to me.
upvoted 0 times
...
Andrew
7 months ago
Wait, is it really that simple? I'm not so sure about this.
upvoted 0 times
...
Dannette
7 months ago
Just to clarify, the risk-free rate should be added, right?
upvoted 0 times
...
Aracelis
7 months ago
I think option A is the right choice.
upvoted 0 times
...
Viola
8 months ago
Definitely going with option C! Makes the most sense.
upvoted 0 times
...
Felicidad
8 months ago
I’m confused about whether to add or multiply the rates. I think I need to review how dividends affect forward pricing again.
upvoted 0 times
...
Evangelina
8 months ago
I feel like option C might be the right choice since it uses multiplication, which seems to fit how we calculate future values.
upvoted 0 times
...
Rebecka
8 months ago
I practiced a similar question where we had to calculate the forward price, and I think it was something like market price plus adjustments for rates and dividends.
upvoted 0 times
...
Odette
9 months ago
I remember studying the pricing of equity forwards, and I think it involves adjusting the market price with the risk-free rate and dividends, but I'm not sure about the exact formula.
upvoted 0 times
...
Eileen
9 months ago
I've seen questions like this before. The key is to focus on the relationship between the forward/futures price and the underlying factors like the market price, risk-free rate, and expected dividends.
upvoted 0 times
...
Halina
9 months ago
I'm a bit confused by the different formulas. I'll need to carefully review the concepts of equity forwards and futures to determine which one is the correct relationship.
upvoted 0 times
...
Rikki
9 months ago
Okay, let's think this through step-by-step. We need to find the relationship that correctly prices the equity forward or futures contract based on the given information.
upvoted 0 times
...
Nickolas
9 months ago
This question seems straightforward, but I want to make sure I understand the relationship between the equity forward/futures price and the market equity price, risk-free rate, and expected dividend rate.
upvoted 0 times
...
Ines
11 months ago
Option C is the clear winner here. It's the formula I've seen in my textbooks, and I'm not about to start questioning the wisdom of financial experts.
upvoted 0 times
...
Viki
12 months ago
Option C, no doubt. It's the only one that doesn't have me scratching my head and wondering what kind of sorcery is going on.
upvoted 0 times
Wilda
11 months ago
User 2: Yeah, it seems the most straightforward.
upvoted 0 times
...
Elvera
11 months ago
User 1: I think option C is the way to go.
upvoted 0 times
...
...
Stephen
12 months ago
Option C is the way to go. It's the only one that correctly captures the relationship between the current market price and the forward or futures price.
upvoted 0 times
...
Beata
12 months ago
Definitely going with Option C. The formula is straightforward and aligns with the underlying principles of forward and futures pricing.
upvoted 0 times
...
Lavelle
12 months ago
I'm pretty sure it's Option C. The relationship makes sense intuitively, as the forward or futures price should be the current market price adjusted for the time value of money and expected dividends.
upvoted 0 times
Orville
11 months ago
I agree, it seems like the most logical choice.
upvoted 0 times
...
Allene
11 months ago
I think you're right, Option C does make sense.
upvoted 0 times
...
...
Erasmo
1 year ago
Option C seems to be the correct one. The forward or futures price should be the market price multiplied by the term (1 + risk-free rate - expected dividend rate) raised to the power of the time to expiration.
upvoted 0 times
Bernardo
11 months ago
User 3: That makes sense, it accounts for the time value of money.
upvoted 0 times
...
Mollie
12 months ago
User 2: I agree, it should be market price x (1 + risk-free rate - expected dividend rate)t.
upvoted 0 times
...
Rodney
12 months ago
User 1: I think the correct relationship is C.
upvoted 0 times
...
...
Viki
1 year ago
But C makes more sense because it accounts for the risk-free rate and expected dividend rate.
upvoted 0 times
...
Lyla
1 year ago
I disagree, I believe the correct relationship is A.
upvoted 0 times
...
Viki
1 year ago
I think the answer is C.
upvoted 0 times
...

Save Cancel