Two Assets $A$ And $B$ Have the Same Spot Price Today $A$ Is Expected to Grow at 10% Over the Next Year

question 11

Multiple Choice

Two assets $A$ and $B$ have the same spot price today.The price of asset $A$ is expected to grow at 10% over the next year and that of asset $B$ is expected to grow at 10% also.Asset $A$ has a standard deviation of returns of 10% over the year and asset $B$ has standard deviation of 15%.Which of the following is true if there are no holding costs or benefits?

• A)Asset \(A\)
• 's one-year forward price will be less than that of asset
• \(B\)
• B)Asset \(A\)
• 's one-year forward price will be greater than that of asset
• \(A\)
• C)Asset \(A\)
• 's one-year forward price will be equal to that of asset
• \(B\)
• D)Any of the above may be true.

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Definitions:

Overlap

The extent to which two or more things cover the same area or share common elements.

Frequency Distribution

A statistical analysis that shows how often each different value in a set of data occurs.

Original Observations

Refers to the initial set of data or measurements collected in a study or experiment before any manipulation or analysis.

Grouped

The categorization of data into intervals, often used in statistical analysis to simplify raw data sets.