A Forward Price Can Differ from a Futures Price Due

question 5

Multiple Choice

A forward price can differ from a futures price due to any one the following EXCEPT:

• A) the two contracts have different commodity price risks
• B) the two contracts have different credit risks
• C) the two contracts have different legal risks
• D) the two contracts have different interest rate risks in the reinvestment of cash flows
• E) the contracts are structured as different entities-a forward has a terminal cash flow,while futures have daily cash flows

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Definitions:

Trieb

A German term used by Freud, often translated as "drive" or "instinct", referring to the internal forces that motivate behavior.

Motivating Forces

The internal or external factors that stimulate desire and energy in people to be continually interested and committed to a job, role, or subject, or to make an effort to attain a goal.

Sex Act

Physical activities involving sexual intercourse or other forms of sexual expression between individuals.

Paradoxical

Characterized by seemingly contradictory qualities that may nevertheless be true when observed from different perspectives.