Problem

16. In the absence of interest-rate uncertainty and delivery options, futures and forward...

16. In the absence of interest-rate uncertainty and delivery options, futures and forward prices must be the same. Does this mean the two contracts have identical cash-flow implications? (Hint: Suppose you expected a steady increase in prices. Would you prefer a futures contract with its daily mark-to-market or a forward with its single mark-to-market at maturity of the contract? What if you expected a steady decrease in prices?)

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Solutions For Problems in Chapter 3