Assume No Transactions Costs Exist for Any Futures or Forward

question 59

Multiple Choice

Assume no transactions costs exist for any futures or forward contracts. The price of the euro 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 the above; there is no relation between the futures and forward prices.

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Definitions:

Information Content

The value or significance of a piece of information, especially in terms of its utility in influencing decisions or behaviors in financial markets.

Quarterly Dividends

Dividends paid to shareholders by a corporation four times a year, usually at the end of each financial quarter.

Current Dividend Amount

is the total sum of money paid to shareholders in the most recent dividend distribution, based on the number of shares they own.

Trading Range

The difference between the highest and the lowest prices at which a security trades over a certain period of time.