Which of the following statements are TRUE?
A) Futures contracts have less liquidity risk and credit risk than forward contracts.
B) Futures contract prices are strongly linked to the prevailing level of the underlying spot index.
C) Futures contract decrease in price the further forward in time the delivery date is set.
D) Futures contracts have more liquidity risk and credit risk than forward contracts.
E) Futures contract prices are weakly linked to the prevailing level of the underlying spot index.

Question

Quizplus · Accepted Answer

Futures contract prices are strongly linked to the underlying spot index, meaning changes in the underlying asset's price can have a significant impact on the futures contract price. Choices A and D are contradictory, and there is no evidence to support choice E. Additionally, choice C is incorrect, as the price of futures contracts may increase or decrease as the delivery date approaches, depending on various factors.

Which of the Following Statements Are TRUE