Assume the futures price of a commodity is equal to the future value of the cash price, calculated at the risk-free rate. Given this, which one of the following terms applies to the market for this commodity?
A)positive basis equilibrium
B)humped market
C)inverted market
D)time equilibrium
E)spot-futures parity

Question

Quizplus · Accepted Answer

This scenario describes the spot-futures parity, which states that the futures price of a commodity should be equal to the spot price plus the cost of carry, which includes interest and storage costs. In this case, the cost of carry is equal to the risk-free rate, so the futures price equals the future value of the cash price.

Assume the Futures Price of a Commodity Is Equal to the Future