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4. Which term describes the following relationship between the expected spot price and the price of...

4. Which term describes the following relationship between the expected spot price and the price of the commodity futures contract? E(ST) > FT

A. Roll yield

B. Contango

C. Parity

D. Backwardation

5. Which of the following does NOT describe an area of specialization in the venture capital industry?

A. Specialization by industry

B. Specialization by geography

C. Specialization by currency

D. Specialization by stage of financing

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Homework Answers

Answer #1

4.D Backwardation

Explanation:-

Backwardation is when the future price of an asset is below the expected spot price.

Contango is when the future price of an asset is above the expected spot price.

Roll yield refers to the return earned in commodity futures investment. It may be positive or negative depending upon whether the market is in contango or backwardation.

Parity refers to the situation where two prices are equal.

5. C. Specialization by currency

Explanation:-

Venture capital Industry can be specialized on the basis of industry it invests in, on the basis of geographical area and on the basis of stage of financing of the firm.
However it cannot be specialized in the basis of currency.

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