Which of the following can explain a contango?
A)the interest rate exceeds the dividend yield
B)the cost of carry is negative
C)futures prices exceed forward prices
D)the market is at less than full carry
E)none of the above

Question

Quizplus · Accepted Answer

Contango occurs when the futures price is higher than the expected future spot price, often due to the cost of carry, which includes storage costs and interest rates. If the interest rate exceeds the dividend yield, it contributes to a positive cost of carry, leading to contango.

Which of the Following Can Explain a Contango