Hello all, I am confused on a question and I need your help on this!
suppose that a commodity market exhibits the following futures curve in July 1, 20X1:
Spot price: 42.0
August futures price: 41.5
October futures price: 40.8
December futures price: 39.7
An investor establishes a fully collateralized long position on July 1,
20X1, and maintains the position for one year. The futures curve
on July 1, 20X2, is identical to the futures curve on July 1, 20X1, and
calendar spreads did not change significantly during the year. The
investor’s total return on the position is most likely:
A. equal to the collateral return.
B. less than the collateral return.
C. greater than the collateral return.
I would really appreciate your help on this!