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76
As inventories of a commodity decline, which of the following is true?
A.The one-year futures price as a percentage of the spot price increases
B.The one-year futures price as a percentage of the spot price decreases
C.The one-year futures price as a percentage of the spot price stays the same
D.Any of the above can happen
A.The one-year futures price as a percentage of the spot price increases
B.The one-year futures price as a percentage of the spot price decreases
C.The one-year futures price as a percentage of the spot price stays the same
D.Any of the above can happen
Answer: B
When inventories decline, the convenience yield increases and the futures price as a percentage of the spot price declines.
When inventories decline, the convenience yield increases and the futures price as a percentage of the spot price declines.
Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015