CFA Practice Question

There are 206 practice questions for this study session.

CFA Practice Question

Other things equal, futures will carry lower prices than forwards when ______
A. interest rates are uncorrelated with future prices.
B. interest rates are positively correlated with future prices.
C. interest rates are negatively correlated with future prices.
Explanation: If interest rates are positively correlated with future prices, futures will carry higher prices than forwards. For example, futures will generate gains when interest rates are going up (and thus future prices are going up as they are positively correlated), and traders with long positions can invest these gains for higher returns.

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kjw88 Futures have daily cash settlement.
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