A synthetic for signing a forward contract promising to buy cotton in 6 months includes:

Selling cotton today

Shorting cotton in the futures market

Buying cotton today, and storing it

A market is in contango when

Prices are expected to rise

The longer the maturity, the higher the Futures price

Investors are happy

The slope of the futures curve is negative

A market is in backwardation when

The slope of the futures curve is negative

The prices are expected to drop

People are acting strange

If the storage cost for a commodity becomes increasingly expensive, futures prices also begin to increase.

True

False

If a stock pays dividends, the higher the dividends, the higher the higher the futures price.

True

False

When shorting a stock that pays dividend, an investor must pay dividends to the original owner until the stock is returned.

True

False

Answer rating: 100% (QA)

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