Question #9
Reading: Reading 32 Introduction to Commodities and Commodity Derivatives
PDF File: Reading 32 Introduction to Commodities and Commodity Derivatives.pdf
Page: 3
Status: Incorrect
Correct Answer: A
Your Answer: B
Question
Suppose that corn futures contracts are in backwardation. Which of the following is least likely to be true?
Answer Choices:
A. Spot price of corn is higher than the futures price
B. the basis for corn futures contract is negative
C. roll yield on the corn futures is positive
Explanation
When the futures contract is in backwardation, the spot price is greater than the futures
price and the difference between the spot and futures price (i.e., the basis) will be positive.
If the market is in backwardation, roll yield will be positive.