According to the cost of carry model, the relationship between the spot (S₀) and futures price (F_0,T) is A) S₀ = F_0,T/(1 + r_f)^T. B) S₀ = F_0,T(1 + r_f)^T. C) S₀ + F_0,T = (1 + r_f)^T. D) S₀ = F_0,T + (1 + r_f)^T. E) S₀ - F_0,T = (1 + r_f)^T.

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Quizplus · Accepted Answer

The cost of carry model states that the futures price equals the spot price plus carrying costs, which includes interest, storage, and insurance. Therefore, the relationship between the spot and futures price is S₀ = F_0,T/(1 + r_f)^T.

According to the Cost of Carry Model, the Relationship Between