Chapter 17, Problem 3PS

Summary Introduction

(A)

To calculate:

Theoritical future price in accordance with sport future partity

Introduction:

Future price refers to the price pertaining to which two parties transact the commodity at a predeteromed price at a specific date in the future. It represents the price of commodity or stock on future contract in comparison to the current or spot price.

Summary Introduction

(B)

To determine:

The strategy that can be taken into consideration by investor to ascertain benefit out of the mispricing in future, if any

Introduction:

The future contract refers to the financial contract which is standardized in nature and is made between two parties wherein one party provide consent to sell or purchase the commodity at a particular date in the future and at a particular price to the other party which provide consent to purchase or sell the same. In the futures contract the physical delivery of the commodity does not take place.