CFA Level I · CFA Level I Exam · Natural Resources
An investor holds a fully collateralized long position in crude oil futures. Over one year the spot price rises 4.0%, the roll return is -3.0% and the collateral earns 2.5%. The total return is closest to:
The total return is about 3.5%. Add the spot return of 4.0%, the negative roll return of 3.0% and the collateral return of 2.5%. Treating the roll return as positive would give 9.5%, which is wrong.
- A-1.5%
- B3.5%Correct
- C9.5%
Explanation
Total return = spot 4.0% + roll (-3.0%) + collateral 2.5% = 3.5%. The 9.5% option adds the roll return with the wrong sign (4.0+3.0+2.5). The -1.5% option subtracts the collateral return.
Did you get it right without looking?
One question tells you little. A timed set on Natural Resources shows your real accuracy, how long you take and where you lose marks.
More Natural Resources questions
- An investor holds a fully collateralized long position in a commodity futures contract. The return on the position is most likely the sum of…
- A fund holds a long position in a commodity futures contract. The spot price stays unchanged, and the futures curve is in steep contango. Ea…
- A commodity futures curve is in backwardation. An investor with a long position who rolls from the near contract to the next contract, with …
- Compared with investing in physical commodities, gaining exposure through exchange-traded futures contracts most likely:
- An investor wants exposure to timberland for portfolio diversification. Compared with most commodity futures, a key feature of timberland as…
- A fund holds a long position in commodity futures in a market where near-dated contracts trade at lower prices than far-dated contracts. Ass…