If There Is a Convenience Yield, Then the Following Is

question 17

Multiple Choice

If there is a convenience yield, then the following is true of the forward price:

• A) The forward price is higher than it would be if there were no convenience yield.
• B) The bid price may be higher than the ask price on the forward.
• C) The forward price does not depend on the convenience yield.
• D) The forward price is lower than it would be with no convenience yield.

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Definitions:

Crossover Point

The point at which two different financial scenarios yield the same result or where an investment's cost and benefits intersect.

Cash Inflows

Money or funds received by a business during a period of time from various sources including sales, investments, and financing.

Average Accounting Return

A measure of the profitability of an investment, calculated as the average net income generated by an investment divided by its initial cost.