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    Question

    The difference between the spot price and the futures

    price of an asset is primarily explained by:
    A Volatility. Correct Answer Incorrect Answer
    B Beta. Correct Answer Incorrect Answer
    C Cost of carry (including interest rates, storage, etc.). Correct Answer Incorrect Answer
    D Market sentiment only. Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    For investment assets, the futures price is theoretically the spot price plus the cost of carrying (financing, storing, insuring) the asset until delivery. For commodities, it also includes a convenience yield.

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