CFA Pop Quiz #224: Level II – Alternative Investments

The spot price of sugar is USD 0.20 per pound. Trading in the three-month sugar futures contract suggests the basis is USD 0.02 per pound. The three-month futures price is closest to:

A. USD 0.18 per pound.
B. USD 0.20 per pound.
C. USD 0.22 per pound.

Correct Answer C

The basis of a commodity is its futures price minus its spot price. In this case, the USD 0.02 should be added to the spot price of USD 0.20 to obtain a futures price of USD 0.22 per pound.


End of quiz

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