Which of the following is true of the market price of a futures contract over time?
A)It is set at time 0.
B)It is fixed over the life of the contract.
C)It changes based on the market value of the underlying asset.
D)It decreases with time to expiration.

Question

Quizplus · Accepted Answer

The market price of a futures contract changes based on the market value of the underlying asset. Factors such as supply and demand, economic conditions, and geopolitical events can all affect the price of the asset, which in turn affects the futures price. The price is not fixed over the life of the contract, nor is it set at time 0. While futures contracts may experience time decay as they approach expiration, this does not necessarily mean that the price decreases with time to expiration.

Which of the Following Is True of the Market Price