CFA 2026 Level I Derivatives Forward Contracts Free Quiz 3

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CFA 2026 Level I Derivatives Forward Contracts Free Quiz 3

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CFA 2026 Level I Derivatives Forward Contracts Free Quiz 3

Practice CFA 2026 Level I Derivatives MCQs from Forward Contracts. Get instant results with Explanation.

General5 MCQs

21. What additional costs may be included in the forward price of a commodity?

A. Cost of carry (storage, insurance, financing).B. Spot price only.C. Convenience yield.D. Risk-free rate.

22. What is the convenience yield in commodity forward pricing?

A. Increases the forward price.B. Reduces the forward price.C. Has no effect on the forward price.D. Is the same as storage costs.

23. How does the dividend yield affect the forward price of a stock?

A. F = S0 * e^(r) * TB. F = S0 * e^(r + q) * TC. F = S0 * e^(r - q) * TD. F = S0 * e^(r) * T

24. Can the payoff of a forward contract be negative?

A. Always positive.B. Always zero.C. Always positive for long positions.D. Can be negative, so the holder may owe money.

25. How can a forward contract be closed out before maturity?

A. Entering an offsetting position.B. Assignment to a third party.C. Novation to a clearinghouse.D. Trading on an exchange.

General5 MCQs

26. What is the primary risk of a forward contract?

A. Market risk.B. Counterparty credit risk.C. Liquidity risk.D. Operational risk.

27. What is the documentation for a forward contract?

A. Exchange-traded contract specifications.B. Option contract terms.C. A bilateral agreement between the counterparties.D. A swap agreement.

28. What is a key characteristic of a forward contract?

A. Standardized.B. Exchange-traded.C. Transparent.D. Customized.

29. What is a key benefit of a forward contract?

A. To lock in a price for a future transaction.B. To lock in an unfavorable price.C. To avoid all risk.D. To guarantee profits.

30. When is the credit risk of a forward contract highest?

A. When the contract is out-of-the-money.B. When the contract is in-the-money for one party.C. When the contract is at-the-money.D. When there is no credit risk.

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Conducting Body: CFA Institute

Frequency: 4 times a year (February, May, August, November) | Time: 135 Minutes

Negative Marking: No

⚡ Test Pattern (Total: 90 MCQs):

Alternative Investments: 8 MCQs
Corporate Issuers: 7 MCQs
Derivatives: 5 MCQs
Economics: 7 MCQs
Equity Investments: 12 MCQs
Ethics: 16 MCQs
Financial Statement Analysis: 11 MCQs
Fixed Income: 11 MCQs
Portfolio Management: 9 MCQs
Quant Methods: 6 MCQs

Merit Formula: -

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