Why is it difficult to compute the unrealised return on a futures contract?

A) The risk-free rate may change
B) Future dividends are unknown
C) Futures trading requires an upfront payment that consists a fixed percentage of the total value of the security
D) The cash outlay in a futures contract is substantially less than required for purchasing the underlying security

Question

Why is it difficult to compute the unrealised return on a futures contract?

A) The risk-free rate may change
B) Future dividends are unknown
C) Futures trading requires an upfront payment that consists a fixed percentage of the total value of the security
D) The cash outlay in a futures contract is substantially less than required for purchasing the underlying security

Quizplus · Accepted Answer

One problem with futures markets is that returns are not easily constructed.The change in the value of a contract does not represent the return that an investor would receive.Although the investor may be required to make an up-front payment and perhaps some future payment,this cash outlay in a futures contract is substantially less than that required for purchasing the underlying security.

Why Is It Difficult to Compute the Unrealised Return on a Futures