When futures prices are used to estimate cash flows, the estimates are:
I. Present value of future cash flows
II. Certainty equivalents
III. Same as the estimates using spot prices

Name: When futures prices are used to estimate cash flows, the estimates are: I. Present value of future cash flows II. Certainty equivalents III. Same as the estimates using spot prices
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Question

Quizplus · Accepted Answer

Futures prices are used to estimate certainty equivalents, which are adjusted for risk, rather than present value or spot price estimates.

When Futures Prices Are Used to Estimate Cash Flows, the Estimates