The spot price of an asset is positively correlated with the market. Which of the following would you expect to be true?
A. The forward price equals the expected future spot price.
B. The forward price is greater than the expected future spot price.
C. The forward price is less than the expected future spot price.
D. The forward price is sometimes greater and sometimes less than the expected future spot price.
C
When the spot price is positively correlated with the market the forward price is less than the expected future spot price. This is because the spot price is expected to provide a return greater than the risk-free rate and the forward price is the spot price grossed up at the risk-free rate.
You might also like to view...
Wendt, Inc counted its ending inventory as $178,000 at year-end, January 31, 2014 . Upon review of the records, it was noted that the following items were in transit during the count: A) $2,000 of goods shipped by a supplier to Wendt sent FOB destination on January 31 were received February 5, and were not counted by Wendt. B) $5,000 of goods shipped by a supplier to Wendt sent FOB shipping point
on January 30 were received February 2, and were not counted by Wendt. C) $6,000 of goods shipped by Wendt to a customer FOB shipping point on January 31 were received by the customer February 3, and were counted by Wendt. Determine the correct inventory balance at January 31. a. $178,000 b. $177,000 c. $174,000 d. $172,000
Which of the following is not part of the shareholders' equity section of the balance sheet?
A) working capital B) contributed capital C) treasury stock D) retained earnings
Discuss the tenant's and the landlord's basic duties under a landlord-tenant relationship
Brad Turret, one of the managers of a multi-national company, is responsible for generating revenues and controlling costs in order to increase the operating income of his division
However, he is not concerned about investment-related decisions. Brad is most likely to be the manager of a(n) ________. A) cost center B) investment center C) profit center D) revenue center