Question

    Animesh enters into a short position in a forward

    contract where the forward price is Rs.25 and spot price at maturity is Rs.30. What will be Animesh’s payoff?
    A Gain of 5 Correct Answer Incorrect Answer
    B Loss of 5 Correct Answer Incorrect Answer
    C Gain of 10 Correct Answer Incorrect Answer
    D Loss of 10 Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    For a short position, the person has agreed to sell the underlying asset at Rs.25. As such, if the spot price increases at maturity, there is a loss. Therefore, loss for the spot position is 25 – 30 = -5

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