If the price of the futures contracts increases as the time to maturity increases we say...
If the price of the futures contracts increases as the time to maturity increases we say that the curve is in ________________ :
A) Contango
B) Backwardation
C) At a premium
D) At a discount
E) None of the above
Homework Answers
The upward slope which is also known as contango is the opposite
of backwardation.
If prices are higher with each successive
maturity date in the futures
market, it's described as an upward sloping forward curve.
This is Contango.
Add Answer to:
If the price of the futures contracts increases as the time to
maturity increases we say...
Comparing forward and futures contracts, we can say that: a. forward contracts are traded on organized...
Comparing forward and futures contracts, we can say that: a. forward contracts are traded on organized exchanges while futures contracts are traded over-the-counter. b. forward contracts are standardized contracts while futures contracts are usually tailor-made. c. delivery of the underlying asset is usually made in forward contracts and delivery of the underlying asset is seldom made in futures contracts. d. forward contracts are mainly used for speculative purpose while futures contracts are mainly used for hedging purpose
What do we call a market where prices today are higher than the prices in the...
What do we call a market where prices today are higher than the prices in the futures? A. Contango market B. Inverted market C. Basis market D. Backwardation What do we call a market where the futures prices are higher than the current prices? A. Contango market B. Inverted market C. Backwardation D. Exchange based marekt
13. Assume there are only three possible outcomes for the sp commodity which underlies a futures...
13. Assume there are only three possible outcomes for the sp commodity which underlies a futures contract a contract. As seen today, these prices (i.e. those at the maturi contract) are 90, 100 or 110 and each may occur with probabin ossible outcomes for the spot price of a underlies a futures contract at the maturity of that futures se prices (i.e. those at the maturity of the futures ach may occur with probability 1/3, 1/3 and 1/3. sume that...
Which of the following can explain a contango? a. futures prices exceed forward prices b. the...
Which of the following can explain a contango? a. futures prices exceed forward prices b. the cost of carry is negative c. when spot prices and futures prices dance around each other over time d. excess current supply causes the spot price to be less than the futures price e. none of the above
The futures price of gold is $1,000. Futures contracts are for 100 ounces of gold, and...
The futures price of gold is $1,000. Futures contracts are for 100 ounces of gold, and the margin requirement is $3,000 a contract. The maintenance market requirement is $1,500. A speculator expects the price of gold to rise and enters into a contract to buy gold. a. How much must the speculator initially remit? b. If the futures price of gold rises to $1,005, what is the profit and return on the position? c. If the futures price of gold...
A gold mining firm sells futures contracts worth 1000 ounces at a price of $700 per...
A gold mining firm sells futures contracts worth 1000 ounces at a price of $700 per ounce for maturity one year from today. If gold futures prices increase to $702 per ounce, what is the cash flow to the producer? O A. $702,000 ○ B. -S2000 C. $700,000 O D. $0 O E. $2000
30. Which of the following is true? A. Both forward and futures contracts are traded on exchanges Porward contracts are traded on exchanges, but futures contracts are not. Futures contracts ar...
30. Which of the following is true? A. Both forward and futures contracts are traded on exchanges Porward contracts are traded on exchanges, but futures contracts are not. Futures contracts are traded on exchanges, but forward contracts are not. D: Neither futures contracts nor forward contracts are traded on exchanges. 2. Long answer questions (25 points) Note: write down the necessary st eps; round the answer to two decimal points, e g . 0.45%. (1) The following table gives the...
1. Which of the following trades implies that ownership has been taken? a. Buying a futures...
1. Which of the following trades implies that ownership has been taken? a. Buying a futures contract. b. Selling a futures contract. c. Buying a stock. d. Shorting a stock. e. None of the above implies ownership. The following transactions are the only ones made during the first 4 days a futures contract trades. Answer question 2 based on this table. DAY TRANSACTION S O 1 A Long 30, B Short 30 2 A Long 55, C Short 55 3...
sume there are only three possible outcomes for the spot price of a commodity which underlies...
sume there are only three possible outcomes for the spot price of a commodity which underlies a futures contract at the maturity of that futures contract. As seen today, these prices (i.e. those at the maturity of the futures contract) are 90, 100 or 110 and each may occur with probability 1/3, 1/3 and 1/3. Further, assume that futures market prices are set in accordance with the theory of (normal) contango. Which of the following is a potential price that...
17. Suppose that the T-bond futures price is 101-12. Which of the following four bonds is cheapest to deliver? Bond...
17. Suppose that the T-bond futures price is 101-12. Which of the following four bonds is cheapest to deliver? Bond Cash Price esion Factor 1.2131 1.3792 125-05 142-15 1.1149 1.4026 3 115-31 144-02 a, Bond # 1 b, Bond # 2 c, Bond # 3 d, Bond #4 18. What number is closest to the duration of a 12% annual coupon bond maturing in 5 years and yielding i 1967 Assume a $1,000 face value. a. 2.5 years b. 3.0...
13. Assume there are only three possible outcomes for the sp commodity which underlies a futures contract a contract. As seen today, these prices (i.e. those at the maturi contract) are 90, 100 or 110 and each may occur with probabin ossible outcomes for the spot price of a underlies a futures contract at the maturity of that futures se prices (i.e. those at the maturity of the futures ach may occur with probability 1/3, 1/3 and 1/3. sume that...
A gold mining firm sells futures contracts worth 1000 ounces at a price of $700 per ounce for maturity one year from today. If gold futures prices increase to $702 per ounce, what is the cash flow to the producer? O A. $702,000 ○ B. -S2000 C. $700,000 O D. $0 O E. $2000
30. Which of the following is true? A. Both forward and futures contracts are traded on exchanges Porward contracts are traded on exchanges, but futures contracts are not. Futures contracts are traded on exchanges, but forward contracts are not. D: Neither futures contracts nor forward contracts are traded on exchanges. 2. Long answer questions (25 points) Note: write down the necessary st eps; round the answer to two decimal points, e g . 0.45%. (1) The following table gives the...
1. Which of the following trades implies that ownership has been taken? a. Buying a futures contract. b. Selling a futures contract. c. Buying a stock. d. Shorting a stock. e. None of the above implies ownership. The following transactions are the only ones made during the first 4 days a futures contract trades. Answer question 2 based on this table. DAY TRANSACTION S O 1 A Long 30, B Short 30 2 A Long 55, C Short 55 3...
sume there are only three possible outcomes for the spot price of a commodity which underlies a futures contract at the maturity of that futures contract. As seen today, these prices (i.e. those at the maturity of the futures contract) are 90, 100 or 110 and each may occur with probability 1/3, 1/3 and 1/3. Further, assume that futures market prices are set in accordance with the theory of (normal) contango. Which of the following is a potential price that...
17. Suppose that the T-bond futures price is 101-12. Which of the following four bonds is cheapest to deliver? Bond Cash Price esion Factor 1.2131 1.3792 125-05 142-15 1.1149 1.4026 3 115-31 144-02 a, Bond # 1 b, Bond # 2 c, Bond # 3 d, Bond #4 18. What number is closest to the duration of a 12% annual coupon bond maturing in 5 years and yielding i 1967 Assume a $1,000 face value. a. 2.5 years b. 3.0...
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