Question #11
Reading: Reading 32 Introduction to Commodities and Commodity Derivatives
PDF File: Reading 32 Introduction to Commodities and Commodity Derivatives.pdf
Page: 4
Status: Correct
Correct Answer: A
Question
Which of the following statements regarding commodity returns is least accurate?
Answer Choices:
A. The collateral yield on a commodity futures position is negative if the convenience yield is lower than the storage cost
B. A commodity futures market in backwardation will increase the return on an investor’s position via a positive roll yield
C. Due to roll yield and collateral yield, a commodity futures position may have a positive yield despite a drop in the spot price
Explanation
The collateral yield is the return on the cash used to collateralize the futures position and
is independent of the futures price.