Explanation:
Forward and futures prices are equal when there is no meaningful difference in the effect of daily settlement, which happens when interest rates are constant (so reinvestment effects do not differ) and the forward has negligible credit risk.
So the best answer is D.
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Q-164.5. Under what condition should the price of a FORWARD contract equal the price of a FUTURE contract, if the commodity and specifics of the contracts (e.g., maturity) are otherwise identical? (Best answer)
A
If the financing cost (r), storage cost (u), income (q) and convenience yield (y) are identical
B
If the counterparty (credit) risk on the forward contract is virtually zero
C
If the riskfree interest rate is constant and the rate curve is flat
D
If the riskfree interest rate is constant and the rate curve is flat; and if the counterparty (credit) risk on the forward contract is virtually zero