In the Absence of Arbitrage,the Futures Price at Maturity Should

question 17

Multiple Choice

In the absence of arbitrage,the futures price at maturity should equal

• A)The price at inception plus interest on the margin account for the period of the contract.
• B)The spot price of the underlying asset at that point.
• C)The price at inception plus the storage cost for the asset over the contract period.
• D)The price of the underlying asset minus a convenience yield.

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Definitions:

Liquidation Expenses

Liquidation Expenses are the costs associated with dissolving a company, including paying off debt, selling assets, and compensating employees and creditors.

Profit and Loss Allocation

Profit and Loss Allocation involves distributing a business’s profits and losses among its various stakeholders or business areas.

Journal Entry

The record of a financial transaction in the accounting records of a business.

Other Assets

Assets that don't fit into the main categories of current assets, property, plant, equipment, or intangible assets.