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

question 15

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:

Color

A property of light as seen by people, typically defined by its wavelength or frequency.

Crystals

Solid materials whose constituents, such as atoms, molecules, or ions, are arranged in a highly ordered microscopic structure.

Minerals

Naturally occurring inorganic substances with a definite chemical composition and crystalline structure, forming the building blocks of rocks.

Scratch Test

A method used to determine the relative hardness of minerals by scratching them with an object of known hardness or with other minerals.