Answer: The riskfree rate increases

**Correct answer: A. The riskfree rate increases** Under the cost-of-carry relationship, a higher **risk-free rate** increases the carrying cost of holding the underlying asset and therefore tends to **increase the futures price**. Why the other choices are false: - **B**: Delivery location options favor the short and tend to reduce the futures price. - **C**: Delivery timing options also benefit the short and tend to reduce the futures price. - **D**: A convenience yield lowers the futures price because it provides a benefit from holding the physical commodity, reducing the cost of carry.

Author: Manit Arora