At the expiration of a futures contract,the futures price will be:
A) greater than spot price.
B) equal to the spot price.
C) less than the spot price.
D) more than the forward price.

Question

Quizplus · Accepted Answer

At expiration, the futures price should converge to the spot price. This is known as the convergence condition. Therefore, the futures price should be equal to the spot price. Option A and C are incorrect because they imply that the futures price will be either greater or less than the spot price, which should not be the case. Option D is incorrect because it suggests that the futures price will be more than the forward price, which is not necessary.

At the Expiration of a Futures Contract,the Futures Price Will