In the absence of transactions costs,for the same maturity and currency:
A) the futures price is always higher than the forward rate.
B) the forward rate is always higher than the futures price.
C) the futures price and the forward rate are the same.
D) the futures price and the forward rate are not related.

Question

Quizplus · Accepted Answer

In the absence of transactions costs, the futures price and the forward rate for the same maturity and currency are theoretically equal. This is due to the arbitrage opportunity that arises if they are not equal, making market participants buy the cheaper one and sell the more expensive one until they converge to the same level.

In the Absence of Transactions Costs,for the Same Maturity and Currency