You Hold a Forward Contract to Take Delivery of Government

Multiple Choice

You hold a forward contract to take delivery of Government of Canada bonds in 9 months. If the entire term structure of interest rates shifts down over the 9-month period, the value of the forward contract will have _____ on the date of delivery.

A) risen
B) fallen
C) not changed
D) either risen or fallen, depending on the maturity of the T-bond
E) collapsed