On the Day of Delivery

question 65

Multiple Choice

On the day of delivery

• A)the spot price will equal the futures price.
• B)the spot price will be greater than the futures price by an amount equal to the current interest rate times the futures price.
• C)the futures price will be greater than the spot price by an amount equal to the current interest rate times the spot price.
• D)there is no necessary relation between the spot price and the futures price.

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Definitions:

Total Utility

The total satisfaction or benefit received by consuming a given total quantity of a good or service.

Utils

A theoretical unit of measurement used in economics to represent satisfaction or utility obtained by consuming goods and services.

Income Effect

Changes in economic or personal income and the resulting impact on how much of a product or service is sought after.

Substitution Effect

The change in consumption patterns due to a change in relative prices, leading consumers to substitute away from more expensive goods toward cheaper ones.