In the Absence of Arbitrage, the Futures Price at Maturity

question 3

Multiple Choice

In the absence of arbitrage, the futures price at maturity should equal

• A) The price at inception plus interest on the margin account for the period of the contract.
• B) The spot price of the underlying asset at that point.
• C) The price at inception plus the storage cost for the asset over the contract period.
• D) The price of the underlying asset minus a convenience yield.

---

Definitions:

$700 Billion Bailout

Refers to the Emergency Economic Stabilization Act of 2008, a U.S. government program to purchase distressed assets from financial institutions to stabilize the economy.

Henry Paulson

A former American banker who served as the Secretary of the Treasury during the critical period of the financial crisis in 2007-2008.

Great Recession

A severe global economic downturn that occurred from late 2007 through mid-2009, marked by significant declines in economic activity and employment.

Retirement

The process of leaving one's job and ceasing to work, typically upon reaching a certain age, often accompanied by receiving pension benefits.