Series 3: Exercise

Exercise

Answer true or false.

1. 1. _____ Carrying costs only apply to agricultural products.
2. 2. _____ Cost of carry can sometimes refer to interest charges.
3. 3. _____ When the price difference between two contracts having two different delivery months equals the full cost of carry, the market is known a normal market.
4. 4. _____ In an inverted market, the price of a futures contract becomes progressively higher with the extension of the contract over time.
5. 5. _____ Backwardation and contango are opposite conditions.
6. 6. _____ Contango is a condition more typical for agricultural commodities in stable markets; backwardation is more typical for products in volatile markets.
7. 7. _____ A forward curve that is inverted in all months is said to be humped.
8. 8. _____ The sp