Assume no transactions costs exist for any futures or forward contracts. The price of the euro futures with a settlement date 180 days from now will:
A) definitely be above the 180-day forward rate.
B) definitely be below the 180-day forward rate.
C) be about the same as the 180-day forward rate.
D) none of the above; there is no relation between the futures and forward prices.

Question

Quizplus · Accepted Answer

In the absence of transaction costs, the futures price should be approximately equal to the forward rate for the same settlement date, as both are derived from the same underlying asset and reflect the same market expectations.

Assume No Transactions Costs Exist for Any Futures or Forward