The Forward Price of an Asset That Has No Holding

question 24

Multiple Choice

The forward price of an asset that has no holding costs or benefits is equal to

• A)The compounded price of the spot asset,where the compounding takes place at the risk-free rate.
• B)The compounded price of the spot asset,where the compounding takes place at a rate equal to the expected return on the asset.
• C)The market's expectation of the future spot price of the asset.
• D)Its current spot price.

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Definitions:

Monopoly Power

The ability of a monopoly to dictate the terms of the market, including price and quantity of goods or services provided.

Free Entry

Free entry refers to a market condition where firms can enter the industry without facing any barriers or restrictions.

Long Run

Amount of time needed to make all production inputs variable.

Price Elasticity

A measure of the responsiveness of quantity demanded or supplied of a good to a change in its price, indicating how changes in price can affect consumption or production volumes.