Assume no transactions costs exist for any futures or forward contracts. The price of British pound futures with a settlement date 180 days from now will:
A) definitely be above the 180-day forward rate.
B) definitely be below the 180-day forward rate.
C) be about the same as the 180-day forward rate.
D) None of these are correct; there is no relation between the futures and forward prices.

Question

Quizplus · Accepted Answer

Futures and forward contracts for the same underlying asset and settlement date should theoretically have the same price, assuming no transactions costs and perfect market conditions. Therefore, the price of British pound futures with a settlement date 180 days from now should be about the same as the 180-day forward rate.

Assume No Transactions Costs Exist for Any Futures or Forward