CFA Practice Question

CFA Practice Question

Which of the following is incorrect?
A. Convenience yield can be a reason for oil prices being in contango during the summer driving season (when demand for oil is higher than average).
B. Higher storage costs can lead to prices being in contango.
C. In a Forward Rate Agreement the buyer (Long) receives floating rate on the notional amount from the seller (Short), and the seller receives fixed rate from the buyer.
Explanation: Higher storage costs can lead to prices being in contango.

User Contributed Comments 1

User Comment
achoi0 For FRA's, the buyer is the one who receives the floating rate payment while the seller is the one who pays the fixed payment.
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