Question: (12 points, 3 points each) True or False. State whether the last sentence is true or false. No explanations are necessary; the grade will be

(12 points, 3 points each) True or False. State whether the

(12 points, 3 points each) True or False. State whether the last sentence is true or false. No explanations are necessary; the grade will be based on the answer only. (a) Suppose that the one year rate is 4% and the two year rate is 5% (EAR). Then the forward rate for a loan from t=1 year to t= 2 years will be approximately 6% (within a few basis points). (b) Since forward and futures prices reflect the time value of money, the futures price for delivery of oil in 2 months is always higher than the futures price for delivery of oil in 1 month. (c) A farmer who grows wheat may be willing to enter into a short forward contract for wheat even when the forward price is less than the expected future spot price (Fo

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