In the Absence of Arbitrage Opportunities, the Forward Price Should

question 147

True/False

In the absence of arbitrage opportunities, the forward price should be equal to the spot price plus the cost of carry.

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Definitions:

Constrained Resource

A factor within a production process that limits the output or efficiency, such as machinery capacity or raw material supply.

Contribution Margin

The amount remaining from sales revenue after variable expenses are deducted, indicating how much revenue is contributing to fixed costs and profit.

Automated Factory

A production facility that relies heavily on automated processes and machinery to manufacture goods with minimal human intervention.

Fixed Expenses

Costs that do not vary with the level of production or sales, such as rent, insurance, and salaries.