The Relationship Between the Spot and Futures Prices of Financial

question 65

Multiple Choice

The relationship between the spot and futures prices of financial futures is given by

• A)[Futures price] = Spot price x (1 + r_f)^t (where r_f = risk-free rate).
• B)[Futures price] = Spot price x (1 + r_f - y)^t (where y = dividend yield or interest rate).
• C)[Futures price] = Spot price x (1 + r_m)^t (where r_m = market rate of return).
• D)[Futures price] = Spot price x (1 + r_m - r_f)^t.

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