What Is Likely to Happen If the Futures Price for Treasury

question 3

Multiple Choice

What is likely to happen if the futures price for Treasury bonds to be delivered in three months is above the spot price plus the carrying costs?

• A)An arbitrageur will buy Treasury bonds in the spot market and sell a futures agreement.
• B)An arbitrageur could sell Treasury bonds in the spot market while buying a futures agreement.
• C)An arbitrageur could purchase Treasury bonds in the spot market while buying a futures agreement.
• D)An arbitrageur could sell Treasury bonds in the spot market while selling a futures agreement.

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