Rolling Over Short-Dated Futures Contracts Is the Same as Taking

question 4

Multiple Choice

Rolling over short-dated futures contracts is the same as taking one long-dated futures contract if

• A) The interest rates are constant.
• B) The average change in the spot price is zero over the life of the contract.
• C) There is daily mark-to-market of both the short-dated and long-dated contracts.
• D) The size (notional value) of the open position in the futures does not change over the horizon of the transactions.

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Definitions:

Expected Return

The anticipated amount of profit or loss an investment is likely to generate over a specific period.

Required Return

The minimum expected return an investor demands for the level of risk taken on an investment.

Dividend

A part of a company's profits given out to its shareholders, often as cash or extra stock.

Growth Rate

A measure of the increase in size, number, value, or strength of something over a specific period of time.