The answer is C and the explanation for this is that price of a forward or futures contract refers to price specified in the contract.
For a forward contract, it can be understood. But for a futures contract, its price changes daily on the exchange. So if price of a futures contract refers to the price specified in the contract, then what is price changing on the exchange called?
A future on wheat, for example, has a price of 65 today and the settlement date is in 30 days. That price remains constant until expiration of the future contract because we have agreed to buy/sell wheat in 30 days for 65. As you see, it is like a forward contract. The only difference is the daily compensation of value in the clearinghouse, but forget thar for now.
Suppose a 3 days have passed since we arranged our future above. What is the price of our future now? Yup, 65.
What is the price of a future on wheat of 30 days from now? Possibly not 65 anymore, but a different value because the market of wheat moves.
Yes I know that the price specified in the contract remains unchanged. But I’m just wondering, what is the price on the exchange called? Isn’t it also price of the futures contract? And it changes daily.
I think the book uses the term “future price” without any differentiation because it is not ambiguous that the agreed price of a future does not change and the market prices of futures are the ones that constantly change.