On Monday morning you sell one June T-bond futures contract at 97:27 or for $97,843.75. The contract's face value is $100,000. The initial margin requirement is $2,700 and the maintenance margin requirement is $2,000 per contract. Use the following price data to answer questions 67 through 70.
-If r_f is greater than d then we know that _______________.

Question

On Monday morning you sell one June T-bond futures contract at 97:27 or for $97,843.75. The contract's face value is $100,000. The initial margin requirement is $2,700 and the maintenance margin requirement is $2,000 per contract. Use the following price data to answer questions 67 through 70.

-If r_f is greater than d then we know that _______________.

Quizplus · Accepted Answer

If the risk-free rate (r_f) is greater than the dividend yield (d), the cost of carry model suggests that the futures price will increase with longer maturities, as the cost of holding the asset (financed at the risk-free rate) outweighs the income from dividends.

On Monday Morning You Sell One June T-Bond Futures Contract