Derivatives - Derivatives Section 2

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14. The forward price is least likely affected by:

  • Option : C
  • Explanation : How the investor feels about risk is irrelevant, because the forward price is determined by arbitrage.
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15. Which of the following factors increases the forward price of a commodity?

  • Option : B
  • Explanation : The convenience yield and interest income are benefits of holding the asset which are subtracted from the compounded spot price and reduces the commodity’s forward price. The opportunity cost is the risk-free rate, which increases the commodity’s forward price.
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