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LOS c: Explain how forward and futures prices differ.
Q1. Compared to the price on an otherwise identical forward contract, the price of a futures contract is:
A) always the same at contract initiation.
B) lower when asset price changes are positively correlated with interest rate changes.
C) higher when asset price changes are positively correlated with interest rate changes.
Q2. When interest rate changes are negatively correlated with the price changes of the asset underlying a futures/forward contract:
A) forward prices are higher.
B) futures prices are higher.
C) futures prices may be higher or lower depending on the risk-free rate and price volatility.
Q3. Compared to futures prices on a six-month contract, forward prices on an identical contract are:
A) always higher.
B) equal.
C) higher, lower, or equal.
Q4. To initiate an arbitrage trade if the futures contract is underpriced, the trader should:
A) borrow at the risk-free rate, buy the asset, and sell the futures.
B) borrow at the risk-free rate, short the asset, and sell the futures.
C) short the asset, invest at the risk-free rate, and buy the futures. | 
发表于 2009-3-27 16:50
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