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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?

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Suggested Answer: C

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

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Kizzy
2 months ago
I disagree, option D seems off to me.
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Andrew
2 months ago
Wait, is it really that simple? I'm not so sure about this.
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Dannette
3 months ago
Just to clarify, the risk-free rate should be added, right?
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Aracelis
3 months ago
I think option A is the right choice.
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Viola
3 months ago
Definitely going with option C! Makes the most sense.
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Felicidad
3 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.
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Evangelina
4 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.
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Rebecka
4 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.
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Odette
4 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.
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Eileen
4 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.
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Halina
4 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.
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Rikki
5 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.
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Nickolas
5 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.
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Ines
7 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.
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Viki
7 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.
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Wilda
6 months ago
User 2: Yeah, it seems the most straightforward.
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Elvera
7 months ago
User 1: I think option C is the way to go.
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Stephen
7 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.
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Beata
7 months ago
Definitely going with Option C. The formula is straightforward and aligns with the underlying principles of forward and futures pricing.
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Lavelle
7 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.
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Orville
6 months ago
I agree, it seems like the most logical choice.
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Allene
6 months ago
I think you're right, Option C does make sense.
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Erasmo
8 months 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.
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Bernardo
7 months ago
User 3: That makes sense, it accounts for the time value of money.
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Mollie
7 months ago
User 2: I agree, it should be market price x (1 + risk-free rate - expected dividend rate)t.
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Rodney
7 months ago
User 1: I think the correct relationship is C.
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Viki
8 months ago
But C makes more sense because it accounts for the risk-free rate and expected dividend rate.
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Lyla
8 months ago
I disagree, I believe the correct relationship is A.
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Viki
8 months ago
I think the answer is C.
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