The futures prices for oil are determined in the market based on ________ for each delivery date.They depend on expectations of future oil prices,adjusted by an appropriate ________.
A) price and cost; risk premium
B) price and cost; inflation premium
C) supply and demand; risk premium
D) supply and demand; inflation premium

Question

Quizplus · Accepted Answer

Futures prices for oil are determined by supply and demand for each delivery date. The expectations of future oil prices are adjusted by an appropriate risk premium, which reflects the uncertainty or risk associated with future prices. Therefore, the correct option is C, which states that futures prices depend on supply and demand and a risk premium. Neither A nor B accurately reflect the factors that determine oil futures prices, and while D correctly references supply and demand, it incorrectly suggests an inflation premium.

The Futures Prices for Oil Are Determined in the Market