Chartered Financial Analyst Level 2
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19 An investor enters a futures contract on a commodity at a price of $100. At the end of the month, the futures price is $99. If the roll yield is 0.8% and the collateral return is 0.5%, the total return for the month is closest to:
Exam-Like
A
-2.3%
B
0.3%
C
3.6%
Explanation:
Explanation
The total return for a commodity futures position consists of three components:
- Price return - from changes in the futures price
- Roll yield - from rolling futures contracts
- Collateral return - from the collateral posted
Calculation:
- Price return = (Ending price - Beginning price) / Beginning price = (
$99-$100) /$100= -1.0% - Roll yield = +0.8% (given)
- Collateral return = +0.5% (given)
Total return = Price return + Roll yield + Collateral return = -1.0% + 0.8% + 0.5% = 0.3%
Therefore, the total return is closest to 0.3%, which corresponds to option B.
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