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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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