If the futures price at 3:00 p.m.is 122,the spot price is 142.5 and the CF is 1.1575,by how much must the spot price fall by 5:00 p.m.to justify delivery?
A)1.285
B)1.1102
C)20.50
D)17.71
E)42.94

Question

Quizplus · Accepted Answer

The correct calculation involves adjusting the futures price by the conversion factor (CF) to compare it with the spot price. The adjusted futures price is 122 * 1.1575 = 141.215. The spot price is 142.5, so the difference, or the amount by which the spot price must fall to justify delivery, is 142.5 - 141.215 = 1.285.

If the Futures Price at 3:00 P