Assume no transactions costs exist for any futures or forward contracts. The price of British pound futures with a settlement date 180 days from now will:
A) definitely be above the 180-day forward rate.
B) definitely be below the 180-day forward rate.
C) be about the same as the 180-day forward rate.
D) none of the above; there is no relation between the futures and forward prices.

Question

Quizplus · Accepted Answer

Since there are no transaction costs involved, the futures and forward prices should converge to the same price at maturity. Therefore, the price of British pound futures with a settlement date 180 days from now should be about the same as the 180-day forward rate.

Assume No Transactions Costs Exist for Any Futures or Forward