Assume No Transactions Costs Exist for Any Futures or Forward

question 155

Multiple Choice

Assume no transactions costs exist for any futures or forward contracts. The price of British pound futures with a settlement date 180 days from now will:

• A) definitely be above the 180-day forward rate.
• B) definitely be below the 180-day forward rate.
• C) be about the same as the 180-day forward rate.
• D) None of these are correct; there is no relation between the futures and forward prices.

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Definitions:

Articles of Confederation

The first governing document of the United States, created before the Constitution, which provided a loose federation of the states with limited central government power.

Ratified

The process by which a proposed treaty or agreement is officially approved and adopted by the necessary parties or institutions.

States

Distinct territorial and political entities within a federal system, each with its own government and a degree of autonomy.

Government-less State

A hypothetical or theoretical situation where society operates without a formal government, often associated with anarchism or extreme libertarian views.