On Day 1, Buyer and Seller enter into a contract for the right to purchase one s
ID: 2487620 • Letter: O
Question
On Day 1, Buyer and Seller enter into a contract for the right to purchase one share of stock. On Day 1, the fair value of the stock is $75.00. Buyer and Seller agree that this contract will last for 30 days, and it gives the buyer the right to buy, if Buyer so chooses, one share of stock for $80.00. Buyer pays Seller $2.00 for this right. In order for this contract to be a forward contract:
It is impossible to create a forward contract from these circumstances
A and C
The seller must have ownership of the stock that will be sold
The buyer has to be obligated to buy the stock, and the option is omitted
Explanation / Answer
The seller must have ownership of the stock that will be sold
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