The basic spot-futures parity condition is:
A) S = FT(1 + r)
B) F = S(1 + r)T
C) ST = F(1 + r)T
D) S = FT(1 + r)T
E) F = ST(1 + r)

Question

Quizplus · Accepted Answer

The basic spot-futures parity condition is given by F = S(1 + r)T, which implies that the futures price (F) of an asset should equal the spot price (S) of the same asset adjusted for the risk-free interest rate (r) over the term of the futures contract (T). This relationship holds in efficient financial markets and has important implications for investors and traders who use futures contracts to manage their risk exposure or to speculate on future price movements.

The Basic Spot-Futures Parity Condition Is