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

question 13

Multiple Choice

Two assets $A$ and $B$ have the same spot price today.Asset $A$ is expected to grow at 10% over the year and asset $B$ is expected to grow at 12%.Which of the following is true if there are no holding costs or benefits for either asset?

• 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)None of the above can be ascertained with certainty,as it also depends on other factors.

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Definitions:

Annuity

A financial product that pays out a fixed stream of payments to an individual, primarily used as an income stream for retirees.

Interest Rate

Interest rate is the percentage charged by a lender to a borrower for the use of assets, adjusting for the cost of credit or the return on investment.

Lump Sum

A single payment made at a particular time, as opposed to several smaller installments.

Future Value

The value of an investment at a specified date in the future that accounts for a specified rate of interest or rate of return.