Answer: value and constant price.

## Explanation A forward contract has a **fixed forward price** that is agreed upon at inception and remains constant throughout the life of the contract. However, the **value** of the forward contract changes over time as market conditions change. ### Key Concepts: 1. **Forward Price**: The price at which the underlying asset will be bought/sold at expiration. This is fixed at contract initiation and does not change. 2. **Forward Value**: The current worth of the contract to the long or short position. This value fluctuates as: - Spot price of the underlying asset changes - Interest rates change - Time to expiration decreases - Dividends or other carrying costs change ### Why Option A is Correct: - **Constant price**: The forward price is fixed and does not change over the life of the contract. - **Variable value**: The value of the contract changes as market conditions evolve. ### Why Other Options are Incorrect: - **Option B**: Incorrect because the forward price is constant, not variable, and the value is variable, not constant. - **Option C**: Incorrect because while the value is variable, the forward price is constant, not variable. ### Real-World Example: If you enter a forward contract to buy 100 shares of XYZ at $50 in 6 months: - The forward price remains $50 (constant) - If XYZ's spot price rises to $55 after 3 months, the value of your long position becomes positive - If XYZ's spot price falls to $45 after 3 months, the value of your long position becomes negative The forward price stays at $50, but the contract's value changes with market movements.

Author: LeetQuiz .