- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 46. Basics of Derivative Pricing and Valuation
- Subject 5. Why do Forward and Futures Prices Differ?

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**CFA Practice Question**

If interest rates are known to be going up by 0.25% each month for the next 10 months, the price of a 6-month futures contract will be ______ the price of an otherwise equivalent forward contract.

A. lower than

B. equal to

C. higher than

**Explanation:**The price of a futures contract will equal the price of an otherwise equivalent forward contract if interest rates are known or constant. Under this condition, any effect of the addition or subtraction of funds from the marking-to-market process can be shown to be neutral. In this case we know the interest rates, although they are not constant.

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**User Contributed Comments**
7

User |
Comment |
---|---|

broadex |
great question!!! |

ybavly |
great question!!! |

ars2011 |
nice question |

tomalot |
Wow! 10/10: Would answer again |

janis36 |
superb, I recommend everyone this question! |

thegabbo |
This is the best question in the history of the CFA exams - maybe ever! |

michelebb |
eally useful! thanks |