The Actual Futures Price Will Diverge from the Theoretical Futures

question 27

True/False

The actual futures price will diverge from the theoretical futures price because of interim cash flows, differences between lending and borrowing rates, transaction costs, restrictions on short selling, and uncertainty about the deliverable asset and the date it will be delivered.

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Definitions:

Price Level

The average of current prices across the entire spectrum of goods and services produced in the economy, serving as an indicator of inflation or deflation.

Aggregate Quantity

The total amount or sum of goods and services produced or supplied in an economy at a given overall price level during a specific time period.

Aggregate Demand

The total demand for all goods and services within an economy at different price levels, during a specified time period.

Investment Spending

The expenditure on capital goods including buildings, machinery, and equipment, which are used to produce goods and services in the future.