Multiple Choice
The relationship between the spot and futures prices of financial futures is given by
A) [Futures price] = Spot price × (1 + rf) ^t (where rf = risk-free rate) .
B) [Futures price] = Spot price × (1 + rf − y) ^t (where y = dividend yield or interest rate) .
C) [Futures price] = Spot price × (1 + rm) ^t (where rm = market rate of return) .
D) [Futures price] = Spot price × (1 + rm − rf) ^t.
Correct Answer:
Verified
Correct Answer:
Verified
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