In the Absence of Arbitrage Opportunities,the Forward Contract Price Should

question 47

Multiple Choice

In the absence of arbitrage opportunities,the forward contract price should be equal to the current price plus

• A) Contract price.
• B) The cost of carry.
• C) Margin requirement.
• D) The price discovery rate.
• E) The convenience return.

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Definitions:

WTO

The World Trade Organization, an international body that deals with the rules of trade between nations to ensure that trade flows as smoothly, predictably, and freely as possible.

World Bank

The World Bank is an international financial institution that provides loans and grants to the governments of poorer countries for the purpose of pursuing capital projects aimed at reducing poverty and supporting development.

Modern Economy

Characterizes economies that are highly industrialized and usually have a significant reliance on technology and service sectors.

Specialization and Exchange

This concept depicts how individuals, firms, and nations can increase their productivity through specialization in tasks they perform best and exchanging their outputs for other goods and services.