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Assume the Futures Price of a Commodity Is Equal to the Future

question 75

Multiple Choice

Assume the futures price of a commodity is equal to the future value of the cash price, calculated at the risk-free rate. Given this, which one of the following terms applies to the market for this commodity?


Definitions:

Internal Rate Of Return

The discount rate at which the net present value of an investment project is zero; the rate of return of a project over its useful life.

Cash Inflow

The total amount of money being received by a company, often from its main activities such as sales of goods or services.

Investment Required

The amount of capital needed to undertake a project, purchase assets, or start a business to generate future returns.

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the goal of shareholder wealth maximization.

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