The relationship between the price in the cash market and the price in the futures market is
A) nonexistent.
B) negative.
C) positive.
D) None of the above.

Question

Quizplus · Accepted Answer

The relationship between the price in the cash market and the price in the futures market is generally positive. The prices in both markets tend to move in the same direction, reflecting changes in the supply and demand for the underlying asset. When demand for the asset increases in the cash market, the price tends to rise, and traders in the futures market will bid up the price of futures contracts on that asset. Similarly, when supply increases, the price tends to fall, and futures prices will typically follow suit.

The Relationship Between the Price in the Cash Market and the Price