CFA Level I · CFA Level I Exam · Natural Resources
An investor holds a fully collateralized long position in a crude oil futures contract. Over one year the spot price rises 4.0%, the roll yield is −3.0% and the collateral yield is 2.0%. The total return on the position is closest to:
The total return is about 3.0%. A fully collateralized futures return is the sum of spot return, roll yield and collateral yield: 4.0% plus −3.0% plus 2.0% equals 3.0%. Treating the negative roll yield as positive gives 9.0%, and omitting collateral gives 1.0%.
- A−1.0%
- B3.0%Correct
- C9.0%
Explanation
Total return = spot return + roll yield + collateral yield = 4.0% − 3.0% + 2.0% = 3.0%. The 9.0% option adds the roll yield as positive. The −1.0% option omits the collateral return.
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